Starting pay for all workers hit a record high In September due to an increase in competition for staff, research has found. Experts warn that wage growth will not sustain economic recovery and call on government to work with firms to avoid a “crisis-driven sugar rush”.

The latest Report on Jobs survey by the Recruitment and Employment Confederation (REC) and KPMG found the rate of growth of permanent starting salaries accelerated again in September to hit a new record for the third month in a row. More than half (57 per cent) of the 400 UK recruiters and consultancies polled noted higher pay for new permanent joiners, compared to less than 1 per cent who recorded a fall.

Meanwhile REC’s latest permanent starting salaries index – based on the survey of recruiters and where a score higher than 50 indicates more employers are increasing salaries, and a score below 50 indicates the reverse – rose to 74.7 in September from 73.5 in August.

The temporary wages index also saw an increase to 69.1 in September from 66.8.

Although there were reports of candidates negotiating higher pay, recruitment experts suggest the surge in starting salaries was mostly because of the increased competition for workers and efforts by firms to attract applicants. Claire Warnes, head of education, skills, and productivity at KPMG, said that the unprecedented increase in starting salaries was the highest in 24 years and was being driven by the near record fall in candidate availability.

But she said: “While higher salaries are good for job seekers, wage growth alone is unlikely to help sustain economic recovery because of limited levers to bring people with the right skills to where the jobs are and increase productivity.” Warnes also suggested that while the end of the furlough scheme should bring “tens of thousands of new people to the jobs market”, it was unlikely this new pool of labour would have the right skills to transfer to the sectors with most demand. “Reskilling and supporting people to move jobs which are in demand needs to be speeded up,” she advised and said that firms may otherwise see tensions in the labour market turning into a workforce crisis in many sectors.

Scottish Government Update
But it’s not all doom and gloom. To counteract the above the UK Government has pledged £500m to extend job support schemes – within the chancellor’s new £500m package of support is:

  • an extension of the Kickstart scheme – which provides funding to create new jobs for 16 to 24-year-olds at risk of long-term unemployment – until the end of March
  • extending a Job Entry Targeted Support (JETS) scheme – for those who have been unemployed for more than three months – by another year
  • extending a Youth Offer of guaranteed support for all young people on Universal Credit until the end of 2025
  • extending the £3,000 incentive for firms to take on apprentices until the end of January
  • expansion of support from work coaches for those on Universal Credit
  • prioritising those who have left furlough and are looking for work on Universal Credit through the Job Finding Support service until the end of December.