Why British workers keep getting pay rises despite weak hiring
Summary
Wage growth in the UK has continued to surprise: pay is rising even though hiring has cooled. The article explains that this disconnect is driven by a mix of persistent shortages in particular sectors, large negotiated public-sector and union pay deals, compositional effects in the jobs data (bonuses, overtime and a shift in the mix of roles), and long-term reductions in labour supply such as lower immigration and pandemic-era exits from the workforce. Together these factors keep upward pressure on wages despite weaker headline recruitment figures.
Key Points
- Headline wage growth remains strong even as overall hiring softens, reflecting pockets of tightness rather than broad labour demand.
- Sectoral mismatches — notably in health, hospitality, construction and logistics — mean employers raise pay to retain and recruit scarce staff.
- Public-sector pay settlements and large negotiated wage deals have lifted average wages across the economy.
- Compositional effects (fewer low-paid roles, more overtime and bonuses) push up measured average pay despite subdued hiring.
- Lower net migration and pandemic-era workforce exits have reduced labour supply, amplifying pay pressure in key occupations.
- Persistent wage growth complicates the Bank of England’s inflation outlook and raises costs for employers, even where hiring is weak.
Context and relevance
This topic matters because wages are a central piece of the inflation puzzle and influence monetary policy, business costs and household incomes. The dynamic — wages rising without stronger hiring — suggests the labour market still has structural tightness even if vacancy and hiring metrics look weaker. That shifts how economists and policymakers interpret data: weak hiring does not automatically mean cooling wage pressure. For business leaders it signals ongoing cost and recruitment risk in certain sectors; for workers it helps explain why pay can rise even when firms hire less.
Why should I read this?
Short version: it clears up a head-scratcher. If you’ve been wondering why pay packets are getting bigger while job adverts slow down, this is the tidy explanation — shortages, big public deals, and measurement quirks. Quick, useful and saves you wading through the dense data yourself.
Source
Source: https://www.ft.com/content/08f03654-8062-4caa-b50a-ccc285a00b93