2020 could be the worst year for total pay growth since 2009, according to the National Institute of Economic and Social Research (NIESR) December Wage Tracker.
The Wage Tracker exploits information from key macroeconomic indicators. It builds on information from NIESR’s other ‘nowcasts’ and survey evidence, like labour costs from the Bank of England Agents’ scores.
NIESR is part-funded by the Economic and Social Research Council (ESRC).
The main points from the NIESR December Wage tracker were:
- according to the Office for National Statistics, average weekly earnings, including bonuses (AWE), were 2.7% in the three months to October and 1.9% in real terms in Great Britain
- average pay growth was largest in the finance and businesses sector, at 4.6%, and lowest in the construction sector at -2.2%
- the pay freeze for half of public sector workers will reduce the growth rate of public sector pay, which has been growing faster than private sector pay since the beginning of the pandemic
- the November lockdown in England and continued uncertainty about the pandemic has put downward pressure on private sector pay as the number of furloughed workers probably increased for the first time since April
- NIESR forecasts average weekly earnings, including bonuses, to increase by 1.0% in the fourth quarter of 2020.
Cyrille Lenoël, Senior Economist at NIESR, said:
2020 will probably end up being the worst year for total pay growth since 2009.
Pay freeze for a large part of the labour force, in addition to lost income during the time spent in furlough have put more strain on the labour market than the modest rise in unemployment suggests.
Even with rollout of an effective COVID-19 vaccine, the recovery in the labour market will take time.
Last updated: 25 January 2021