Britain’s surge in wage growth is not as rosy as it seems

Inside Business: Employment growth has started to slow and vacancies are at a 13-month low

James Moore
Chief Business Commentator
Tuesday 16 July 2019 16:16 BST
Comments
Take away shortages in the labour market and employers will no longer need to pay up
Take away shortages in the labour market and employers will no longer need to pay up

British workers are in the money. According to the latest official figures, wage growth hit 3.6 per cent in the year to May 2019, the highest since 2008. It isn’t hard to see why: a balmy employment market. Some 76 per cent of people were in employment over the same period. Unemployment, at 3.6 per cent, was at its lowest since 1974. This is indeed welcome news.

Wage growth started to decline after the last high point in 2008 because of, obviously, the financial crisis. In its aftermath, workers endured the longest squeeze on living standards for 200 years as a result of pay rises, if people even got them, lagging behind inflation. As TUC general secretary Frances O’Grady has often noted, Britain has long been in need of the pay rise it is now getting.

Back to today. In a more normal time, people might be speculating about interest-rate rises to curb the potential inflationary impact of this. And of course, the Bank of England will be watching. But thanks to the B-word, we’re not living in normal times. We’re living in a surreal Philip K Dick novel. And like in those novels, and like in 2008, there’s a storm brewing.

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