In this week’s episode of the ‘PAYING FOR GOOD’ podcast, I welcome back regular guest and chartered statistician Nigel Marriott. In his previous appearances, Nigel has shared his vast knowledge on the gender pay gap and ethnicity pay gap.
As we face a cost of living crisis, employers face a wage inflation crisis. This is what we’re turning our attention to this week.
Click here to play episode
During the interview, Nigel explains the different types of inflation statistics. He covers what they measure, when they’re used, and what they were as at the second quarter of 2022. They are:
● Retail Price Index (RPI)
● Consumer Price Index (CPI)
● Consumer Price Index and Housing (CPIH)
The Office for National Statistics calculates the change in wages by looking at the increase in a sample of taxpayers’ returns year on year. Wage inflation is currently at around 5%. Due to the currently high inflation rate, the differential between the two is negative at about minus 2.5%. This means that wages are not keeping up with the rate of general inflation. It’s the largest fall in over 20 years and it explains the discontent and strike actions we’re seeing in some sectors of the economy.
I then explore with Nigel the tight labour market that, in part, causes wage inflation. The current UK population is at about 67 million. The active working-age population (15 to 64) is at around 42 million, which is lower than it was pre Covid. The supply and demand of labour tension is created by:
● more people out of work (we covered the mass exodus of the over 50s in a previous newsletter). The number of people not looking for work because they are on long-term sickness is at a record high too.
● very low unemployment
● high number of vacancies
● the current immigration system which limits the number of foreign workers coming into the country (although the government might be looking into this)
Interestingly and unusually, the number of vacancies almost matches the unemployment rate at 1.2 million. Sadly, this does not mean there is a job for everyone who wants to work. The skills and experience required in some sectors may be in short supply.
We also talk about the rapid rise in interest rates and how they fuel the cost of living crisis. Both Nigel and I remember mortgage rates of over 10% back in the 1990s! I hope we won’t get there again anytime soon.
Lastly, we take a look at the UK’s productivity. This is defined as output (the national gross domestic product or ‘GDP’) divided by hours worked. Our new prime minister described it as ‘poor’. Nigel explains how it has evolved over time and how it compares to other G7 countries. I encourage you to listen to Nigel’s well-researched interview and read his blog.
Remember that whatever sector you’re in and however big or small your organisation is, base pay, incentives, benefits and pensions are all part of your Responsible Reward offering. By linking your sustainability and remuneration strategies, you become an employer, an investment and an investor of choice. If you wish to explore this topic further, feel free to book a call with me.