Workers who choose to stay in their jobs rather than move are missing out on a “disloyalty bonus”, a new report suggests.
The Resolution Foundation found pay growth has hit 10% for those who change jobs, while those who remain in their posts received a pay rise of just 2.5%.
Nominal pay growth for people who moved jobs in the past year hit 11%, its highest level since the early 2000s, the think tank said.
Pay growth is set to remain around, or slightly below, its current level of 2.7% in the coming months.
Stephen Clarke, senior economic analyst at the Resolution Foundation, said: “As the Bank of England decides whether or not to raise interest rates, the evidence on the key issue of pay pressure is decidedly mixed.
“For those moving jobs, pay growth has hit 10% for the first time in over a decade. However, for the vast majority of workers who didn’t move jobs in the last year, pay is still struggling along at just 2.5% – barely higher than inflation.
“Despite this growing ‘disloyalty bonus’, young workers in particular seem reluctant to make the move.
“While overall pay growth remains weak, interest rate hawks may take the view that, bad as it is, this is still as good as it gets. Those holding off on rate rises may take the view, however, that recent small upticks in pay pressure mean that things can only get better.”
The Bank of England is widely expected to raise interest rates for the first time in almost a decade to 0.75% from 0.5%. Many economists believe now is the right time as employment growth remains robust and inflation is running above the the BoE’s target rate of 2%.
A survey of more than 1,000 businesses by the British Chambers of Commerce (BCC) and recruiters Indeed found firms are ready to give workers a pay rise. More than half the firms are set to award rises above 2% and one in eight in line with inflation, which is currently 2.4%.
Jane Gratton, of the BCC, said: “This is good news for employees who have felt the squeeze in their pay packets in recent months.
“People and skills are the most important asset for businesses, and so employers will want to pay a great wage that motivates and retains their team. But the cost of wage increases has to be offset in some way, for example by greater productivity, lower costs or higher prices.
“Our survey work has shown that growing and pervasive skills shortages are making it harder than ever for firms to fill job vacancies – so it is little surprise that they are pulling out all the stops to keep hold of the ones they have.
“To avoid future job losses, the Government must avoid any additional costs on business and help firms to boost productivity, for example by making it easier for firms to use the apprenticeship levy to upskill their staff.”