Happy New Year! I’m not sure how cheerily that declaration will be received on the first Monday of 2015. Those of you just back at work after the festive season will probably be feeling at least a little of the January blues, while those without a job might be fearful of what the year has in store. I can’t say my personal mood has been lifted by the prospect of having to endure four months of politicking ahead of the General Election, though the possibility of all three main political parties taking something of a hammering come May 7 should raise the pulse rate on polling day. But what can we expect for the day-to-day world of work? This is what my crystal ball is telling me.
The pace of job creation will remain strong in 2015 – with a net rise of 400,000 in the number of people in work taking the employment rate to a new record - but be a little weaker than in 2014 on the expectation that a combination of slower GDP growth and somewhat faster growth in labour productivity will curb hiring activity.
Unemployment will fall to 1.7 million, the unemployment rate dropping back to the pre-recession rate of 5.2%. As a result the rate of growth of average weekly earnings will rise to 2.5%, upward pressure from a pick-up in labour productivity and longer working hours being moderated by labour market flexibility effects and public sector pay constraint. Although this will still leave the annual rate of nominal wage growth around 2 percentage points lower than what was considered attainable and sustainable prior to the recession, with inflation on the CPI measure forecast to remain well below 2% 2015 will nonetheless be a year of solid growth in real wages.
The coexistence of both strong employment growth and real wage growth will make the coming year the best overall for the UK labour market since 2007. However, not all workers will notice a marked improvement in their lot.
As the market tightens there will be greater pressure on employers to increase the relative pay of some workers in an effort to recruit and retain individuals in greatest demand across the occupational skill and personal talent spectrum. Workers with particular technical skills or personal talents in high demand will begin to fare noticeably better in relative terms as will those working for organisations voluntarily prepared and able to offer low skilled workers the Living Wage. But in a labour market still oversupplied with people desperate for whatever work is on offer, employers unable or unwilling to improve working conditions will continue to have no difficulty in hiring staff into minimum wage jobs or on zero-hours contracts without any fringe benefits. This will serve to further widen what has become a clear structural ‘workforce divide’ within the UK’s ultra-flexible and lightly regulated labour market.