The bottom 10 per cent of full-time UK employees earn less than £288 a week. At the other end of the earnings distribution, the top 10 per cent earn more than £1,024 a week, a difference of £736. The relationship between these two figures has been fairly static, says the Office for National Statistics, with the top 10 per cent earning around 3.5 times more a week than the bottom 10 per cent since 1997, when the Annual Survey of Hours and Earnings series began.
The 2014 figures, released today, show that at headline level, pay growth is at its weakest since the series commenced, with gross weekly full-time earnings rising by just 0.1 per cent year-on-year. And when these figures are adjusted for inflation, they show that earnings are actually falling in real terms. The ONS uses the Consumer Prices Index (CPI) inflation figure to calculate a fall of 1.6 per cent in real earnings compared to 2013.
But it isn’t all bad news. The ONS also produces figures just for those who are in the same job in 2014 as they were in 2013, and these figures show pay growth of 4.1 per cent at the median. This figure isn’t affected by changes in workforce composition, for example job creation at the low-paid end, or the loss of high-paid jobs. It reflects the pay rises, progression and promotions that the long-term employed benefit from.
It may be that the gap between the whole-economy pay growth figure and the figure for those in continuous employment is caused by the creation of more jobs at the lower-paid end. And we know that there is more churn at the bottom end of the labour market, with employees tending to move between low-paid jobs, meaning that these jobs are less likely to be included in the continuous employment figures.
But with the economic recovery just beginning to take root, employers may be reluctant to increase pay costs for large numbers of low-paid staff without any perceived return on that investment, meaning that those entering this part of the labour market are unlikely to regard it as a ‘career’.
The UK Commission for Employment and Skills is working with the Department for Work and Pensions to help employers to provide pathways out of low pay, that are beneficial for business, as well as for the workforce. The latest competition launched under our UK Futures Programme is co-investing with businesses to develop Progression pathways in retail and hospitality. This competition responds to the challenge of increasing earnings for low income workers whilst also addressing the costly retention, recruitment and skills gaps faced by businesses in these industries. The deadline for applications is 28 November, so there is still time to submit a bid, and watch this space for updates on how the competition is progressing.