How do you get a pay rise? This is a question most of us would like to know the answer to. Especially seeing as, following the financial crisis, we’ve experienced the worst squeeze on wages in over a hundred years. Typical weekly earnings are £15 lower than they were in 2009, and by 2020 we may have experienced the worst decade of earnings growth since Napoleon was rampaging round Europe. Given this state of affairs it’s perhaps unsurprising that shows such as “How to get a pay rise” are prime time viewing.
What can be done? We at the Resolution Foundation have crunched the latest data from the Office for National Statistics and, while we’re not in the business of careers advice, the results show who’s bucking the trend.
First: move jobs, ideally to another employer. People who stay in the same job earn less than those that take up a new position. The typical real (adjusting for inflation) pay rise for someone staying in the same job last year was just 1.1 per cent, however it was 5.4 per cent for someone who got a new job. This is perhaps unsurprising, a lot of people may only change jobs if they know there’s a hefty financial incentive to do so. What’s also clear in the data is that – unfortunately – loyalty doesn’t pay. Those that switch firm, on average, earn 1 per cent more than those who get promoted and this includes those switching involuntarily, perhaps because they were made redundant or fired. For those that move voluntary, the pay premium is even higher.
Second: get a job in finance, construction, IT, hospitality, manufacturing or farming. These are the only sectors in which pay growth is currently above inflation. In finance the annual growth in average weekly earnings was 1.5 per cent last year, hardly emphatic, but far better than in education or health and social work, where real pay fell by 0.7 per cent and 1.2 per cent respectively. Indeed being a financier or an engineer has been a pretty good idea over the past decade, these two industries are the only ones in which average pay is higher than it was in 2009. By contrast teachers and health workers have not had it so good; average pay in education, health and social work is more than 7 per cent lower than before the crash.
Third: go south, but only if you have somewhere affordable to live. The data is very clear that those that move to the south and east of the country earn the highest pay rises, however for many people such gains are wiped off by housing costs. People moving to London last year increased their real pay by a whopping 17 per cent, those moving to the south east by 8 per cent and those moving to the east by 9 per cent. The boost for moving to the Big Smoke looks particularly appealing but is perhaps less attractive when you consider that housing costs, as a share of people’s monthly spending, are 60 per cent higher in the capital than the U.K. average. The result is that before taking housing costs into account London has the highest household incomes of any part of the U.K., but after adjusting for housing expenses the capital drops to fifth position, with incomes below that of the South West and Scotland.
Don’t open the job and housing search websites just yet, though. As with all these things, there’s a catch. Real wages may have recently started to grow, which is welcome after a year of shrinking pay packets, but it is unlikely that they will be bulging anytime soon. In his latest speech Gertjan Vlieghe, a member of the Bank of England’s Monetary Policy Committee, said that because of low productivity growth “we should probably adjust our expectations of what ‘normal’, full-employment wage growth is likely to be”. ‘Normal’ pay growth in future could be half what it was before the crash, and unless productivity picks up this is something that no amount of smart career moves can change.
This article originally appeared in The Independent.