Real terms wage increases in Wales won’t be sustained until Welsh employers find new ways to increase productivity, through better people management and development, says CIPD, the professional body for HR and people development.
The south east Wales branch of the CIPD has issued the warning after releasing a report which reveals real hourly earnings in Wales have fallen by 4% between 2008 and 2013 when taking in to account inflation.
The report, titled ‘Have we seen the end of the pay rise?’, is the third in a series of four ‘Megatrends’ surveys exploring the future of work and economic challenges which lie ahead, and the CIPD South East Wales has warned that the decline will not be reversed until there is a substantial improvement in the Wales’s poor productivity record.
Mark Beatson, CIPD Chief Economist, said: “The debate over wages and cost of living isn’t going to be solved by the politicians arguing over statistics, rather that employers are only going to be able to pay people more and improve their standard of living again through a focus on productivity.
“The results of this report should serve as a call to action for employers, employees and policy makers in Wales to come together in a combined effort to improve our productivity, which is lagging behind the rest of the UK which, in turn, is lagging woefully behind other rich nations.”
Anna Denton-Jones, director of Refreshing Law Limited and member of the CIPD South East Wales branch, added: “The CIPD South East Wales has already been working with employers on how they can engage their workforce through understanding what motivates employees other than just pay. Employers should be asking themselves, if we assume pay rises are not going to be available, what other tools do we have in our kitbag to reward?
“A key theme that has emerged from events attended by HR professionals from a broad range of employers from both the public and private sectors in Wales is that flexible working is really important and not enough employers are engaging with it to feel the benefits. The ability to balance work and life is crucial and employers who are unwilling to consider greater flexibility are going to miss a trick.
“Employers who adopt more flexible ways for employees to work report reduced staff turnover, reduced sickness absence and critically greater productivity. Greater flexibility, therefore, has to be one key element in improving productivity.”
The report is accompanied by new survey data into employees’ attitudes towards pay which shows that those employed in Wales are also more likely (46%) to predict that their wages will not rise this year.
Furthermore, nearly a quarter (24%) of those who received a pay rise in Wales in 2013 did not see an increase in wage in line with the latest Retail Prices Index, which stood at 2.7% for December 2013.
The survey, which analyses the most sustained and severe fall in real wages since at least the Second World War, also points to the US experience as evidence that a return to real terms increases cannot be taken for granted, even if economic growth does continue. For the median full-time worker in the US, real earnings are no higher now than they were in 1979. According to the report, this is a trend that could take hold in the UK, and indeed in other developed economies.
Mr Beatson concluded: “The government has a part to play too, with a more concerted effort needed to provide an improved supply of higher level skills and just as importantly encourage greater demand for and utilisation of these skills. This needs to be driven through integrated industrial and skills policies designed to equip the UK with the capability to compete more effectively through innovation, efficiency and quality, as compared to an approach that sees us attempting to compete excessively on low cost.”
The CIPD South East Wales has signalled its commitment to assisting employers to improve productivity through a programme of events for the next 12 months that will continue to focus on this area.