UK Living Cost vs Wages

UK Living Cost vs Wages

We are currently living in a society where house prices are higher than ever, retirement age keeps increasing and the general cost of living is on the rise.


Yet, UK wages are not keeping up with inflation, especially at grass roots level. People have to make their income stretch even further.


According to the CBI Labour Market Update, UK Unemployment levels are still at a record low of 4.6% but pay growth is at -0.6% as inflation out strips pay raises.


Inflation > Pay Growth


Having spoken to a number of industry leaders, our concerns are that this will not be an immediate issue but one that will build and build and start to snowball over time.


The people that will notice the Inflation increase moving further and further away from pay growth will be the front line employees. 


A few of the pin point issues that may occur according to employers we work with are:


Instability in the labour market - Due to the low hourly rate that most of grass roots employees are on, companies will start to compete with each other by raising hourly rates by a small amount to secure the work force.


We have seen this before; one site will raise the hourly rate by 5-10p and all the workers in the area will, of course, want to work there. Another site will notice their staff are leaving for the promise of an extra 10p an hour and raise theirs by 20p or start offering more appealing working hours. In the end, the front line workers are chasing the best hourly rate and companies are fighting to keep staff retention up.


This could perhaps be resolved by taking employees on a permanent basis, rewarding loyalty and providing benefits that the employees value.


But I generally believe that if the minimum wage was higher, then 10-20p an hour wouldn’t have such an impact for employees. However, we realise financing this could prove a challenge.  


Increase in a Union presence – A strong concern among many of our clients in the Logistics and Supply Chain sector, is that younger workers in lower level roles will turn to trade union. Using the union as a support to help negotiate better pay rates with employers. 


This will not be exclusive to the younger demographic, as workers will feel under appreciated and use the union to help leverage a better pay rate and conditions.    


This may force the hand for employers further down the line, as trade union presence and membership’s increases.


What can we do to prevent future problems?


Unfortunately it seems we are stuck in a vicious circle. We need economic growth in order to pay higher wages and keep up with inflation.


Companies will need to continue making a profit to pay higher wages resulting in them putting up their prices. Price rises in every day living = more inflation.


As an employer or an employee how would you help resolve potential issues?


And what issues have you started to see already?