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You can find the current article at its original source at http://www.theguardian.com/money/economics-blog/2014/sep/17/wages-rise-employers-compete-pay-labour
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| Wages will not rise until employers have to compete for talent | Wages will not rise until employers have to compete for talent |
| (about 3 hours later) | |
| The year of the pay rise. That was the way 2014 was billed back in January, when the view was that rapidly falling unemployment would force bosses to grant more generous wage settlements. | The year of the pay rise. That was the way 2014 was billed back in January, when the view was that rapidly falling unemployment would force bosses to grant more generous wage settlements. |
| It simply hasn't happened. The economy generated more than 750,000 net jobs over the past 12 months, but earnings are rising at half the rate of inflation. | |
| Mark Carney, the governor of the Bank of England, says it will be the middle of next year before real living standards start to rise. For workers, it's a familiar tale: no jam tomorrow, but jam tomorrow. The squeeze goes on. | Mark Carney, the governor of the Bank of England, says it will be the middle of next year before real living standards start to rise. For workers, it's a familiar tale: no jam tomorrow, but jam tomorrow. The squeeze goes on. |
| A number of conclusions can be drawn from the latest labour market data. The first is that the old relationship whereby falling jobless numbers led to employers being forced to pay more for a shrinking pool of talent has broken down. Weaker trade unions, less collective bargaining, an increase in the percentage of the workforce that is part-time or self-employed: these are all factors keeping the lid on wage increases. | A number of conclusions can be drawn from the latest labour market data. The first is that the old relationship whereby falling jobless numbers led to employers being forced to pay more for a shrinking pool of talent has broken down. Weaker trade unions, less collective bargaining, an increase in the percentage of the workforce that is part-time or self-employed: these are all factors keeping the lid on wage increases. |
| Eventually, the traditional pattern will re-emerge. At some point, unemployment will fall to a level that does lead to such intense competiton for labour that the balance of power in wage negotiations will shift. | Eventually, the traditional pattern will re-emerge. At some point, unemployment will fall to a level that does lead to such intense competiton for labour that the balance of power in wage negotiations will shift. |
| But the current data suggests we are not at that point yet. Estimates of the equilibrium level of unemployment – the rate consistent with hitting the government's 2% inflation target – have been revised down. Why? Because a rising working age population, net inward migration and welfare reforms have increased the pool of labour. | But the current data suggests we are not at that point yet. Estimates of the equilibrium level of unemployment – the rate consistent with hitting the government's 2% inflation target – have been revised down. Why? Because a rising working age population, net inward migration and welfare reforms have increased the pool of labour. |
| When the Bank of England announced its forward guidance policy in August 2013, the unemployment rate stood at 7.8% and Threadneedle Street said it would only start to contemplate a rise in interest rates when it had dipped below 7%, something it did not envisage until early 2016. | When the Bank of England announced its forward guidance policy in August 2013, the unemployment rate stood at 7.8% and Threadneedle Street said it would only start to contemplate a rise in interest rates when it had dipped below 7%, something it did not envisage until early 2016. |
| In the event, the jobless rate fell below 7% in early 2014 and currently stands at 6.2%. The Bank has been busily cutting its estimate of the equilibrium level of unemployment, and on today's evidence will need to continue doing so. That's not just because earnings growth remains weak but because there is tentative evidence that the great British job creation machine is slowing down. | In the event, the jobless rate fell below 7% in early 2014 and currently stands at 6.2%. The Bank has been busily cutting its estimate of the equilibrium level of unemployment, and on today's evidence will need to continue doing so. That's not just because earnings growth remains weak but because there is tentative evidence that the great British job creation machine is slowing down. |
| Two members of the Bank's monetary policy committee are in favour of raising the official cost of borrowing. The chances of Martin Weale and Ian McCafferty securing the votes of the three other MPC members needed for a majority any time soon look extremely slim. 2014 will not be the year of the pay rise. Nor will it be the year of the rate rise. | Two members of the Bank's monetary policy committee are in favour of raising the official cost of borrowing. The chances of Martin Weale and Ian McCafferty securing the votes of the three other MPC members needed for a majority any time soon look extremely slim. 2014 will not be the year of the pay rise. Nor will it be the year of the rate rise. |