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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

Although real pay continued to fall in Q4 2017, the pay squeeze began to ease and averaged over three quarters there was positive (if muted) year-on-year pay growth.

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 low by historical levels and continued to fall this quarter.

Pay rises

Median year-on-year real hourly pay growth for employees in work over a year (both job stayers and changers) remains below the levels of 2015 but above those of the pre-crisis.

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) continues to fall.

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What’s around the corner:

Pay pressures and slack

Unemployment by duration

The unemployment rate ticked up in Q4 but continues to fall compared to a year ago. Long-term unemployment also continues to fall, but with signs that levels are plateauing.

Underemployment

There have been further falls in underemployment (net hours desired by those in work as well as the unemployed) and is back at pre-crisis levels.

Job-to-job moves

Voluntary job-to-job moves continue to rise, although they are still 14 per cent below the average levels from the pre-crisis (2000-07) period.

Migrant job entry

With net migration down by nearly 100 thousand since mid-2016, this may be starting to be felt in the rate at which migrants fill vacancies, with the first drop since 2013.

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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 75.5%, and although signs of a slowdown are evident, participation does not appear to be plateauing yet.

Labour productivity

The end of 2017 bought the first successive two quarters of relatively strong growth in labour productivity since the financial crisis.

Training intensity

‘Off-the-job’ training continues to decline, albeit at a slower rate than in the mid-2000s.

Graduates in non-graduate roles

Grads in non-grad roles reflect mismatches between qualifications and jobs, and may constrain productivity. It has risen over time and ticked up again 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

Is wage pressure building?

To what extent is wage growth picking up? This is an important question, not just for people’s pay packets but also for monetary policy makers in the Bank of England who are weighing up when to raise interest rates further.

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All Data Spreadsheet

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