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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

i Click on an indicator below to see interactive breakdowns

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What's happened:

The earnings breakdown

Median employee earnings

Real pay growth slowed significantly in Q4 2016 and data from Q1 shows that real pay is now falling. The squeeze will be felt across sectors, but particularly in the public sector.

All worker average earnings

Strong self-employed earnings growth in 2015-16 narrowed the gap between the employee average and all worker measure, we estimate the gap has stayed the same since then.

Earnings decomposition

The compositional boost associated with a changing workforce on average weekly pay has fallen. Occupation, qualifications, and now hours explain the fall.

Pay rises

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.

Earnings inequality

Hourly pay inequality between both the upper- and lower-middle (r75:25) and the top and bottom (r90:10) has fallen sharply, in part reflecting the new 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 4.6%, a 40 year low. Long-term unemployment (6 months+) is back to pre-crisis levels but above its mid-2000s low point.

Underemployment

Underemployment (net hours desired by those in work as well as the unemployed) is down 10% but remains 27% above its mid-2000s low.

Job-to-job moves

Job-to-job moves, which are a key mechanism of pay progression and can reflect worker confidence, have flattened since late 2015.

Migrant job entry

Although net migration has fallen since the EU referendum, this hasn’t yet had an effect on migrant labour supply. The share of job entries made up by migrants continues to grow.

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What’s in the pipeline:

Long-term labour market health & efficiency

Workforce participation

Boosting participation is key to full employment (although it can constrain pay growth in the short term). The 18-69 participation rate has risen to another new high of 75.2%.

Labour productivity

Labour productivity is the main long-term driver of real pay. Provisional Q4 calculations show a much needed rise in year-on-year growth, but still well below the pre-crisis norm.

Training intensity

Training can boost individual productivity and may reflect employer confidence. ‘Off-the-job’ training rates have been on a long-term downward path but stabilised in 2016.

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 over the past year.

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

To stick or to twist? Staying and moving jobs under the NLW

The NLW has provided a welcome pay boost for millions of low paid workers and has been the one bright spot in an otherwise bleak pay growth picture. But while the NLW brings a pay rise it also brings challenges, particularly how to encourage progression when pay bands are being compressed.

Read More

All Data Spreadsheet

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