Job Switchers See Highest Pay Growth in a Decade

Research conducted by the Resolution Foundation suggests that there is a clear trend towards a disloyalty bonus. The proportion of workers that are voluntarily switching jobs remains below the pre-crisis level but pay growth for those who do switch jobs is at its highest level in a decade, suggesting that there are benefits to being disloyal to your employer in the long term.

According to the Research Foundation think tank, pay growth for those who stick with their employers is stuck at just 2.5% down significantly from the pre-crisis level of 4 percent. In contrast, those who move jobs have seen their pay grow by as much as 11% over the course of this year. The highest rate of growth for those who have chosen to switch employers in the UK since the 2000s.

The findings are of importance because the Bank of England is looking for signs of wage growth. The bank is considering raising interest rates on Thursday, up from 0.5%, where it has been stagnant since 2009.

The evidence of the existence of a disloyalty bonus suggests that pay growth is just around the corner, but the Resolution Foundation has found that the number of workers that have switched jobs by choice is well down from pre-crisis levels. Just three percent of workers have switched jobs over the last 12 months, down from an average of four percent in the pre-financial crisis era.

Is Low Unemployment a Factor?

Economists note that unemployment has hit its lowest levels since the mid-70s, with joblessness down to 4.2 percent. There are more job vacancies, especially Marketing Assistant jobs and this should be helping people be in a stronger position to demand a pay rise. Under normal circumstances people might move jobs in order to find better pay, but the Resolution Foundation says that the lack of job switching has reduced the pressure that firms feel to raise pay to retain staff.

According to the think tank, underemployment - a situation where workers want more hours than their employer can offer them - has fallen to its mid-2000s low, at 3.7 percent. Women, and workers under the age of 30 still report higher levels of underemployment.

Weak productivity growth remains an issue. This is a measure of economic output per hour worked, and it holds back any prospect of further pay growth. The Foundation believes that wage growth in the UK may remain at or below its current level for the next few months, and it will take a long time to recover to the pre-crisis level of4.5%

Stephen Clarke, one of the senior economic analysts representing the thinktank, noted that as be Bank of England is deciding whether it should raise interest rates the evidence on the issue of pay pressure remains mixed.

Overall pay growth has remained weak, and interest rate hawks may decide that while growth is poor, it is 'as good as it gets'.

Could Growth Continue?

The British Chambers of Commerce (BCC) has expressed doubts as to whether the pace of growth seen right now is likely to continue. Suren Thiru, the Head of Economics at the BCC noted that achieving a meaningful improvement in wage growth is going to be an uphill struggle unless the underlying issues that are limiting pay settlements, such as sluggish productivity, high up-front costs for businesses, and underemployment, are tackled.

Senior labour market analyst Gerwyn Davies noted that an increase in the number of people in full-time work, and a fall in the number of people who are working part time or who are self-employed, suggests that employers are starting to feel more confident about hiring staff. This is likely to continue as the level of jobs vacancies is trending down.

However, it was noted that the shrinking number of candidates is going to feed into increasing recruitment challenges, and retention challenges, for employers.