Job-switching workers enjoy highest pay growth in a decade | Money

Pay growth for workers moving jobs has risen to the highest levels for more than a decade, suggesting a growing “disloyalty bonus” for job movers over those sticking with their employers.

According to research from the Resolution Foundation thinktank, pay growth for the vast majority of workers who stay with their employer remains rooted at just 2.5% – having failed to return to the pre-crisis average of 4% over the past decade.

In sharp contrast, pay growth for people moving jobs in the last 12 months hit 11% earlier this year, the highest growth rate for people switching employers in the UK since the early 2000s.

The findings are significant as the Bank of England looks for signs of wage growth as it considers raising interest rates on Thursday above o.5% for the first time since 2009.

While the rising evidence of a “disloyalty bonus” could suggest stronger pay growth lies around the corner, the Resolution Foundation found the proportion of workers who have voluntarily switched jobs remains well below its pre-crisis levels. Just 3% of workers have moved jobs in the last 12 months, compared with an average of 4% in the year before the crash.

Economists believe the lowest levels of unemployment since the mid-1970s – with a jobless rate of 4.2% – and increasing job vacancies should help workers to demand a pay rise. While people might usually move jobs to find better pay, the Resolution Foundation said the lack of job-switching reduced the pressure on firms to pay their staff more to prevent them from leaving.

According to the thinktank, underemployment – when workers say they want more hours than those offered by their employer – has almost returned to its mid-2000s low of 3.7%. Although this remains elevated for women and workers under the age of 30, it added.

Weak productivity growth – a measure of economic output per hour of work – has continued to hold back the prospect of greater pay growth, following a widespread slowdown since the financial crisis. As a result of these factors, the Foundation said wage growth in the UK could remain at, or just below, the current level of 2.7% over the next few months – well below the pre-crisis average of 4.5%.

Stephen Clarke, a senior economic analyst at the thinktank, 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.

“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.”

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