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The Resolution Foundation Earnings Outlook

A look beyond the headline data on the forces behind current developments in pay, how the fruits are shared, and the short- and longer-term drivers of earnings growth

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What's happened:

The earnings breakdown

Median employee earnings

Real pay has been falling since Q1 2017. The squeeze will have the biggest impact in the public sector

All worker average earnings

Following strong self-employed earnings growth in 2015-16 the difference between the employee average and the all worker measure has remained relatively constant.

Earnings decomposition

The compositional boost to pay associated with a changing workforce has fallen. Changes in the occupational mix are now weighing on pay for first time since late 2015.

Pay rises

The typical real hourly pay change for employees staying in work over a year (both job stayers and job changers) has fallen over the past year, reflecting sluggish pay growth.

Earnings inequality

Hourly pay inequality between the upper- and lower-middle (r75:25) and the top and bottom (r90:10) has again fallen sharply, in part reflecting the National Living Wage.

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What’s around the corner:

Pay pressures and slack

Unemployment by duration

The unemployment rate has fallen to 4.4%, its lowest level since 1975. However long-term unemployment (6 months+) remains above the lows of the early-2000s.

Underemployment

Underemployment (net hours desired by those in work as well as the unemployed) is down 1.4% but remains 20% above the lows of the early-2000s.

Job-to-job moves

Having fallen following the financial crisis, job-to-job moves had been rising steadily since late 2009, however they appear to have plateaued 40% below pre-crises highs.

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What’s in the pipeline:

Long-term labour market health & efficiency

Workforce participation

The 18-69 participation rate has risen to another new high of 75.3%. The UK labour market continues to surprise in its ability to attract groups previously disengaged from work.

Labour productivity

Labour productivity is the main long-term driver of real pay. Provisional Q2 calculations showing that productivity has flat-lined over the past year.

Training intensity

The long-running decline of ‘off-the-job’ training may have come to an end with the share of people engaging in training having risen by 1% over the course of the last year.

Graduates in non-graduate roles

Grads in non-grad roles reflect mismatches between qualifications and jobs, and may constrain productivity. The rate has risen over time but been stable since mid-2015.

PDF Briefing

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RF’s quarterly earnings outlook four page briefing paper.

Read past briefings

PDF Scorecard

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Spotlight

What has happened to the inactive population over time?

We tend to think of people entering work as coming from the ranks of the unemployed. However outside of recessions most people move into work from a period of inactivity

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All Data Spreadsheet

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