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Flat productivity growth leaves employers with little scope to increase wages

01 July 2014

Commenting on today's labour productivity data, Ian Brinkley, chief economist at The Work Foundation, Lancaster University, said:

“There is still no sign of the rebound in productivity growth expected in most economic forecasts. With productivity growth flat, there is little scope for many employers to significantly increase wages, and the pressure on living standards, for many in the labour market, will continue.

However, it is not all gloom and doom: some sectors such as transport equipment manufacturing, administrative and business support services, and more recently, retailing have shown good recoveries – but these are the exception rather than the rule.

These sector differences also make it difficult for the Low Pay Commission to judge what the next rise in the minimum wage (NMW) should be. The LPC has made clear that faster increases in the NMW will depend on what happens to productivity growth across the low pay industries. Here we have big contrasts – productivity in wholesale and retail has increased by over 6 per cent over the twelve months to 2014Q1, but productivity in accommodation and food services has fallen by 3 per cent.”


Notes to editors

1. Ian Brinkley, chief economist is available for interviews, briefings, analysis, and written comment.
2. The Work Foundation transforms people’s experience of work and the labour market through high quality applied research that empowers individuals and influences public policies and organisational practices. The Work Foundation is part of Lancaster University – an alliance that enables both organisations to further enhance their impact.

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