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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 continued to fall in Q3 2017. The pay squeeze looks likely to ease up in early 2018 when inflation moves closer to the Bank’s target of 2 per cent.

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 remains positive, with little change. Improved qualifications are providing the smallest boost since 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

The NLW and poor pay growth at the top means that hourly pay inequality between the upper- and lower-middle (r75:25) and the top and bottom (r90:10) has again fallen.

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What’s around the corner:

Pay pressures and slack

Unemployment by duration

The unemployment rate has fallen to 4.3%, a new low. Falls in long-term unemployment (6 months+) have stalled and it remains above the lows of the early-2000s.

Underemployment

After signs that the post-crisis uptick in job-to-job moves had stalled there is now some evidence that they continue to rise, albeit still well below pre-crises highs levels.

Job-to-job moves

After signs that the post-crisis uptick in job-to-job moves had stalled there is now some evidence that they continue to rise, albeit still well below pre-crises highs levels.

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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 75.4%. Year-on-year growth has slowed slightly, perhaps suggesting the beginning of a slowdown.

Labour productivity

Labour productivity is the main long-term driver of real pay. There is little evidence that growth is picking up following years of post-crisis stagnation.

Training intensity

There has been a slight decline in ‘off-the-job’ training over the past year, but the significant fall that occurred in the 2000s appears to have halted somewhat.

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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All Data Spreadsheet

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