Low-paid job creation has pushed earnings growth to record low

5 Sep 2014 12:45 PM

The shift in employment from higher to lower paying industries, combined with rising levels of under-employment have helped push earnings growth to a record low, according to a new report published yesterday (Thursday) by the TUC.

The TUC-commissioned report examines why average weekly earnings growth – a measure of pay growth published every month by the Office for National Statistics (ONS) – is so low when most pay settlements are keeping touch with inflation.

Last month average weekly earnings growth (excluding bonuses) fell to 0.6 per cent – its lowest level since records began in 2000 – despite employment rising by 167,000 over the same period. Median pay settlements are currently around 2.5 per cent – below their pre-recession level of between 3 to 3.5 per cent.

The report, written for the TUC by Incomes Data Services (IDS), identifies several reasons for the dramatic falls in average weekly earnings growth across the UK:

·    The changing composition of the labour market, with low-paying sectors creating far more jobs than high-paying ones. High-paying industries such as finance and construction have both shed jobs over the last five years.

·    The shift from full-time to part-time work and the increasing number of people wanting more hours in their current job. TUC analysis published recently found that under-employment reached a record high of 3.4 million earlier this year.

·    Additional analysis of figures from the Annual Survey of Hours and Earnings (ASHE) found that people who only featured in the 2013 survey, for example young people joining the workforce for the first time, earned 3.9 per cent less than those who only appeared in the 2012 survey, for example people who had left employment.

The concentration of job creation in low-paying industries is a key reason for the fall in average pay across the economy, says the TUC.

Report & additional information