The RF Earnings Outlook Q1 2017


This Earnings Outlook looks at the first quarter of labour market data for 2017. This was a period when the pay squeeze returned with average weekly earnings falling by 0.4 per cent.  This return is particularly unwelcome as average earnings are still 3.4 per cent below their pre-crisis peak. For Londoners and younger workers in particular – whose pay is still 10 per cent below their peak – getting back to pre-crisis pay levels is still many years away.  In a relatively poor pay landscape the one bright spot is the National Living Wage (NLW) which has substantially boosted pay for low-earners. However, by compressing the pay distribution the NLW also heightens the need to help people progress in work.

Our ‘Spotlight’ article looks at how the NLW has affected pay rises for those that remain in the same job, and those who move jobs.  Away from pay, job creation in the UK labour market continues to surprise; the unemployment rate is at a 40 year low, participation remains at a record high and underemployment continues to fall. In terms of labour supply participation continues to rise and although migration has started to fall this has not yet had a big impact on the labour market. Of concern however is the fact that productivity growth continues to disappoint.  All of this is happening at time of unusually high uncertainty for businesses and employees. With the UK leaving the EU the country’s economy and labour market could change significantly over the next few years. In this briefing we use 13 indicators to take a more detailed look at underlying trends and future prospects.

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