National Living Wage has only a small effect on earnings figures
The introduction of the National Living Wage (NLW) in April appears to have only had a minor effect on the latest Average Weekly Earnings (AWE) figures. The earnings data released today by the ONS are for the period to the end of April 2016 and the figures were expected to show a boost to earnings in the lowest-paid sector, that covering wholesale, retail, hotels and restaurants. However total pay growth in this large sector for the period from February to April 2016 was comparatively modest at 1.3%, up slightly on the even weaker three-month average of 1.0% for January to March.
The single-month figures for the sector showed stronger growth, of 2.3% in the year to April, up from a negative -1.4% in the year to March. But in terms of actual pay there was little movement in the sector between February and April: in February average weekly earnings were £338, in March £336 and in April £339. One possible explanation is that cost-offsetting measures to minimise the impact of the NLW, such as the reduction or removal of premium payments, might have had the desired effect, countering the increase in basic rates.
Overall, average weekly earnings in the whole economy grew by 2.0% in the year to April 2016, the same as in the year to March. Earnings growth in the private sector was 2.1% and in the public sector was 1.8%.
Within the private sector the data shows variations between industries. Earnings growth in the finance and business services sector was 1.7%, down from 2.2% in March, the March figure having been boosted by bonus payments.
Pay growth in construction continues at very high levels. The rate of growth in April was 8.4%, up marginally on the revised figure of 8.3% in March. Skill shortages in a booming sector continue to be the motor for change here.
Pay growth in manufacturing continues to reflect the economic weakness in this sector. Average weekly earnings in April were 1.6% higher than a year ago, down from 1.7% in the year to March.
By: Alastair Hatchett, Visiting Fellow, University of Greenwich