Workers in Britain enjoyed slightly higher pay growth than expected in the first quarter of 2015, while unemployment fell as the employment rate rose to a fresh high.
Recently released official data showed that workforce in Britain expanded by 202,000 and suggested that wage growth, something missing from the economic recovery, is beginning to rise.
Along with inflation’s drop to zero per cent, the pick-up in nominal salaries means that real wages are rising at the fastest rate since 2007.
Economists have warned however that there was still no improvement in productivity, which has stayed flat since the recession in 2008, which has raised questions over the sustainability of the recovery in living standards.
The average weekly pay packet (excluding bonuses) between January and March increased by 2.2 per cent compared to a year ago, the highest growth rate since mid 2011. Total pay (which includes bonuses) increased by 1.9 per cent.
While the figures are slightly higher than economists expected, they remain lower than the average wage growth of 4 per cent a year before the financial crisis.
The employment rate also rose from 73.4 per cent to 73.5 per cent, a fresh record, with the unemployment rate falling to 5.5 per cent, the lowest since mid-2008 and close to the pre-crisis average of 5.3 per cent.
Nearly all the jobs created in the past year were “traditional” full-time roles, in contrast to the earlier stages of the economic recovery, when self-employment and part-time work accounted for most of the growth.
The chief economist at the Resolution Foundation think-tank said Britain’s pay recovery now looked on a “surer footing”.
But Matthew Whittaker warned: “The longer-term challenge — arguably the key one facing the new government — is encouraging productivity gains to ensure that the current level of real wage growth holds as inflation returns to normal.”
John Philpott of the Jobs Economist consultancy added that the “most encouraging [news] of all” is that wages where rising fastest in low wage sectors, averaging 3.1 per cent in wholesaling, retail, hotels and restaurants.
George Osborne said the data were “further proof the plan is working with unemployment falling, record numbers of people in work and confirmation that regular pay packets are growing at their fastest in four years, putting more in people’s pockets and stretching family budgets that bit further”.