Workers Switching Jobs See Greatest Pay Growth In Ten Years

Resolution Foundation Study Shows Possibility of "Disloyalty Bonus" Being Paid

While the number of Marketing Directors voluntarily changing employment positions is still lower than it was prior to the recent crisis, pay increases for those who do make the switch have grown to levels not seen in roughly ten years.

This indicates that something of a "disloyalty bonus" is often paid to those who accept new opportunities and who do not stick with current employers.

A study conducted by the Resolution Foundation revealed that growth in pay for those who remain in their present position has stayed constant at roughly 2.5 %, not bouncing back to pre-crisis levels that averaged about 4% over the last decade.

Conversely, growth in pay for those who have switched jobs in the past year shot up to 11% in the early part of 2018, the most substantial of such growth in the UK since the early part of the 2000s.

These results are notable given the Bank of England's interest in spotting signals of wage growth at the same time it contemplates a rise in interest rates to a level higher than 0.5%, something not seen since 2009.

Though signs of a so-called "disloyalty bonus" may be a sign that a boost in pay growth is in the offing, the study from the Resolution Foundation suggests that the number of workers voluntarily exiting jobs is still below pre-crisis volumes. Only 3% of all employees have changed jobs over the past year, contrasted with roughly 4% having done so in the year prior to the collapse.

Is Low Unemployment the Reason?

Experts in the field of economics have argued that the existence of record low unemployment levels and a rise in vacant positions are giving workers the confidence needed to ask for pay increases. Though many people change jobs to get more attractive pay, researchers from the Resolution Foundation have said that lower rates of job changes lowered the pressure felt by employers to pay workers higher rates to stop their exodus.

The think tank went on to suggest that underemployment, or the circumstance in which a worker desires more hours than their employer provides, has returned nearly to the low rate of 3.7% seen in the middle 2000s. However, this scenario is still observed at greater levels for female workers and workers 30 years of age and under.

Low growth in productivity, an assessment of economic output made for each hour worked, has also retarded the potential for greater growth in pay levels, due to a broad slowing that goes back to the financial crisis itself. Consequently, the Foundation study indicated the likelihood that UK wage growth may stay at or slightly below its present level of about 2.7% for the next several months. This is significantly lower than the pre-crisis 4.5% average.

Foundation senior economic analyst Stephen Clarke has opined that at the same time the Bank of England is considering a possible raise in interest rates, evidence regarding pay pressure appears to be rather mixed. Though there is weakness in overall growth in pay, those who are hawkish about interest rates tend to believe that while this is certainly not a great situtation, it is as good as things can get.

Will Growth Be Persistent?

Commentators from the British Chambers of Commerce revealed concern as to whether a growth pace such as this could persist. The BCC's head of economics stated that it will be difficult indeed to achieve a true boost in wage growth unless the issues underlying limitations on pay settlement are addressed. These include lower productivity levels, notable underemployment and major upfront costs faced by businesses.

An analyst from the CIPD has suggested that a rise in the ranks of full-time employees and a drop in the numbers of part-time and self-employed individuals shows that employers are feeling enthusiastic about hiring additional staffers. This is likely to continue apace as the number of vacant positions soars to new highs. This comment was tempered, however, by the assertion that the decline in sheer candidate numbers will foster a number of retention as well as recruitment dilemmas for employers in many sectors.

Contact us

FREE digital marketing guides for Accountants

Download guides

View allCase studies

Back to top