Pay crunch coming as productivity struggles
14 March 2017
In a press release from the CIPD, the professional body for HR and people development, the acting Chief Economist commented on the Budget:
“While the headline GDP and jobs figures were reassuringly robust, the fact remains that pay is likely to be strongly squeezed over the next few years. With rising inflation likely to bite, real pay is projected to grow by just 0.2% in 2017 and 0.4% in 2018.
It is particularly concerning that real household disposable income, the measure which best indicates how much money people have in their pockets, flat lines at 0% growth in 2017. What follows is a relatively weak return to growth through to 2021, and there is a clear risk that any financial hit, either as a result of Brexit or otherwise, could have a very damaging effect on fragile household budgets.
The government’s productivity plan appears to be having no measureable impact on the economy’s future productivity performance, according to the OBR forecasts. The OBR assumption about future productivity growth between now and 2021 is little different to that published in November 2016 and worse than that published a year ago, in March 2016.
If the economy is to survive the choppy waters presented by Brexit, then it is crucial that the Government does more to address the productivity problem with a greater focus on investment in skills and business support for SMEs, for example, as it is apparent that their current plan is not working."
Read more commentary in the full press release from the CIPD.