Real Wages Rising at Fastest Rate Since 200722 July 2015
Pay growth (excluding bonuses) has averaged 2.8% over the last year, its highest level since February 2009 – with real wages now rising at their fastest rate since 2007.
Employment Minister Priti Patel has said: “The strength of the UK labour market is something we should take great pride in. Today’s figures show real wages growing at the fastest rate since 2007. As part of our one nation government, we want everyone to succeed and achieve their full potential. With the government’s new productivity plan, and introduction of the new living wage, we are ensuring everyone benefits from the economic recovery.”
However, in spite of the fact that rising wages matched with the current low rate of inflation will provide a welcome boost to private consumption and support the UK recovery, there has been cautious optimism elsewhere. Chris Williamson, Chief Economist at Markit believes that these figures may reinforce the case for a halt to record low borrowing costs of 0.5%, and explained to the BBC “Private sector pay growth is approaching rates that would normally start to worry policymakers into tightening policy to avoid wage-price spirals developing”.
The possibility of a rise in interest rates has sparked concerns that the gains for workers from the long overdue wage rise could soon be extinguished by higher borrowing costs, as households continue to struggle with high debt levels and adapt to rising monthly mortgage payments.