Official figures reveal that average pay levels were 2.7% higher in the three months to the end of April than a year earlier; they were expected to be just 2.1% higher, and some economic analysts believe that the actual increase might be closer to 4%.
This is borne out by minutes of the most recent meeting of the Bank of England’s Monetary Policy Committee (MPC), which said: “After accounting for the negative impact on average pay levels of the composition of employment growth, wage growth could be running at an annual rate somewhat stronger.”
Kristin Forbes, of the MPC (pictured), said: “Fears that low inflation would hold back earnings growth have been misplaced. I had worried that workers would have less power to negotiate wage increases in today’s low-inflation environment; instead, wage growth has picked up over the period that inflation has fallen.”
James Sproule, chief economist at the Institute of Directors, said: “Falling energy prices and low inflation have eased the pressure on companies and boosted their balance sheets. Many are now able to pass these benefits on to their staff through pay rises and bonuses.”
Meanwhile, Simon Peck at RBS said: “A spurt of wage growth suggests that the jobs market is becoming tighter, and that employers have had to raise salaries to retain staff and to attract the best remaining talent”.