A new report from the National Institute of Economic and Social Research’s (NIESR) projects that pay growth for 2020 will be the lowest since 2009.
Pay Growth
In its latest quarterly report, the Office for National Statistics (ONS) stated that for the period August 2020 – October 2020, average earnings increased by 2.8%. Once bonuses are also factored in, the rise was 2.7%. In real terms, once inflation is taken account of, pay growth in terms of the rise in average earnings was 2.1%. With bonuses, the increase was 1.9%
The ONS survey also found that:-
- Average pay growth was at its highest in the finance and businesses sector at 4.6%, but fell most in the construction sector by 2.2%. Meanwhile, the wholesaling, retailing, hotels and restaurants sectors registered an increase of 1.6%, whilst manufacturing posted a rise of 0.3%.
- Average pay without bonuses reached £527.00 per week in October 2020. In real terms, once inflation is factored in, it was a record £484.00 per week. This is up from £464.00 per week in April 2020.
- 9% of the workforce remained on either full or partial furlough during the period the 19th October 2020 - 1st November 2020. The accommodation and food service activities sector has the highest proportion of its personnel on furlough at 21.9%
- The number of workers on UK company payrolls in November 2020 was 819,000 less, compared with the beginning of the coronavirus pandemic. The areas of the economy showing the largest falls were in the numbers of part-time workers and amongst the lowest paid. The ONS point out in their survey that: "This changing composition naturally increases average pay and needs to be borne in mind when interpreting average pay growth."
Public Sector Pay Freeze
In his spending review on the 25th November 2020, the Chancellor of the Exchequer, Rishi Sunak, imposed a pay freeze for 2021 on all public sector workers except for those working in the NHS, and for those earning below £24,000.00 who will be guaranteed an increase of at least £250.00. The lowest paid will also benefit from the increase in the national living wage and national minimum wage in April 2021.
Collapse in Pay Growth
In their report, the NIESR project that pay growth is likely to collapse in the fourth and final quarter of 2020 due to the combined effects of the national lockdown during November 2020, the continuing restrictions under the tiered system, and the ongoing uncertainty caused by the coronavirus pandemic. Accordingly, the NIESR forecast that pay growth in terms of average earnings will rise by no more than 1%, including bonuses. Overall, therefore, the NIESR believe that pay growth for the whole of 2020 will be at its slowest since 2009.
Reaction
Responding to the public sector pay freeze, Frances O'Grady, the General Secretary of the Trades Union Congress (TUC), stated: "After a decade of standstill pay, yet another pay freeze is a kick in the teeth for the key workers in the public sector who kept the country going in this crisis." The general secretary at Prospect, Mike Clancy, added: "This freeze will cause huge damage to recruitment and retention in key areas, such as environmental agencies and health and safety, and will be a bitter blow to people who have gone above and beyond to deal with the twin challenges of coronavirus and Brexit."
Nevertheless, the Chancellor of the Exchequer, Rishi Sunak, looked to justify the pay freeze on the basis that: "In such a difficult context for the private sector – especially for those people working in sectors like retail, hospitality, and leisure I cannot justify a significant, across-the-board pay increase for all public sector workers. Instead, we are targeting our resources at those who need it most. To protect public sector jobs at this time of crisis, and ensure fairness between the public and private sectors, I am taking [these] steps."
