A ‘tale of two workforces’ as research reveals a great divide over pay rises

The Chartered Institute of Personnel and Development (CIPD) warned of a “tale of two workforces” as its quarterly labour market report showed 40 per cent of employees enjoyed pay rises of 2 per cent or more while 39 per cent saw their pay frozen and 3 per cent suffered pay cuts.

Another 18 per cent received a pay rise between 0.1 per cent and 2 per cent in the year to December.

The findings suggest that a large part of the British workforce is still feeling the pinch ahead of the general election in May, even though the average wage increase has outpaced inflation in recent months.

“The figures show a clear gap between employees that have comfortably exceeded the current inflation rate in their pay packets and those who haven’t seen any increase at all,” CIPD analyst Gerwyn Davies said.

That may help explain why the Conservative Party is still narrowly trailing Labour in most polls, despite the UK’s headline economic performance being among the strongest in Europe.

The CIPD survey showed public sector workers were hit the hardest, with 54 per cent of public employers saying their wages were frozen. The Bank of England said it expected below-zero inflation in coming months.

Manufacturing firms were among the strongest performers with 54 per cent reporting pay hikes of 2 per cent or more, but more than a third of manufacturing and production firms froze pay. Davies said firms across all sectors were more likely to have awarded large pay increases if their strategy was to maximise value rather than trim costs.

“The role for government is... to understand the levers that can help more firms increase their workplace productivity and move up the quality chain,” he said.