UK labour market tightens but wage growth remains sluggish; no turning point in sight

Press Releases

17 Jul 2018

Institute director, Nigel Meager comments on the July release of ONS labour market statistics:

‘The latest ONS labour market statistics (covering March to May 2018) suggest that the long-expected turning point is not yet in sight. Instead, the inexorable tightening of the UK labour market continues, with records toppling left, right and centre.

‘We have the highest employment rate (nearly 76%) since records began in 1971, and the lowest unemployment rate (4.2%) since 1975, while the other key indicator of a tightening labour market, unfilled vacancies, also stands at a record high level of 824,000.

‘With still more people in work, less unemployment and employers struggling to fill vacancies, we’d normally expect rapid wage growth, but there is nothing of the sort; rather wages are just keeping up with inflation and real wages are still well below pre-crisis levels.

‘Weaker trade unions, erosion of collective bargaining, along with Brexit-related uncertainties are probably part of the reason for the lid remaining on wages.

‘While the lack of wage growth is not good news for hard-pressed workers, possible better news can be found in the detail of the ONS figures. In particular, it seems likely that some of the labour market pressure that would normally be released through wage growth is instead being absorbed through a decline in under-employment and labour market ‘slack’. For example, there has been a recent and rapid decline in the number (and proportion) of ‘involuntary’ part-time workers (ie those who are working part-time, simply because they can’t find a full-time job). Once this slack has been driven out of the system, and if the overall momentum in the jobs market has not yet been hit by weak economic growth and the inevitable economic impact of (hard or soft) Brexit which most reputable economists anticipate, wages must surely respond.’


About Nigel Meager

Nigel is a labour economist by training, and a well-established international expert on labour market and employment policy issues. He has worked at IES since 1984, following posts at the Universities of Bath and Glasgow. He has been Director of the Institute since 2004. He has a long and varied research track record covering the functioning of national, regional and local labour markets, unemployment, skill shortages, labour market flexibility, changing patterns of work and equal opportunity policies and practices.

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