Wages grew by 7.8% in the three months to July 2023, keeping pace with inflation for the first time in over a year despite a rise in unemployment and hiring slow-down, according to new data from the Office for National Statistics (ONS).
Neil Carberry, chief executive of the Recruitment and Employment Confederation (REC), said rising wages will be welcome as the cost of living crisis continues.
He said: “Pay rising to meet falling inflation is a function of firms giving higher pay awards to staff in the spring, ongoing staff shortages in some sectors such as hospitality and logistics, and a big rise in the minimum wage.”
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Wage growth is encouraging, but still leaves workers stretched, according to Terry Payne, global managing director of recruitment agency Aspire.
Speaking to HR magazine, he said: “Make no mistake, wages keeping pace with rising costs is a long overdue and welcome development. But the fact is, most people aren’t feeling the financial benefits just yet. Costs have soared in recent years and many are still struggling to make ends meet.”
According to a report from Aspire in August 2023, almost two thirds (63.5%) of UK workers are not able to save.
Payne said the continued financial squeeze could negatively affect retention.
He added: “The knock-on effect of high costs of living is people searching for higher paying jobs, to boost their income. And while the number of vacancies, overall, is falling slightly, there is still the best part of a million job opportunities in the UK.”
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Meanwhile, in June to August 2023, the estimated number of vacancies fell by 64,000 on the quarter to 989,000. The unemployment rate for May to July 2023 increased by 0.5 percentage points on the quarter to 4.3%.
There was also an increase in economic inactivity, driven by students and those with long-term sickness.
Jon Boys, senior labour market economist for the CIPD, said the persistent high levels of long-term sickness highlight the need for better occupational health.
Between April and June 2023, 2.6 million people were off work due to chronic illness, a figure that has risen by 449,000 since the start of the pandemic in January 2020.
Boys said: “Rising sickness is becoming a persistent theme in the post-pandemic UK population, with record levels of people recorded as inactive due to long-term sickness. The rise in inactivity is a symptom and the rise in sickness is the cause.
“Both policymakers and employers should have a bigger focus on occupational health to stop people falling out of work in the first place. Employers must also take note of the effects of stress at work. This entails good job design and managing workloads effectively.”
The follows an economic slowdown in July 2023, when GDP fell by 0.5%.