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Cooling UK labour market brings down wage growth

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The cooling UK labour market is continuing to bring down wage growth, according to new data that will help to reassure the Bank of England that price pressures are easing.

The median pay award in the private sector fell from 4.4 per cent in the three months to July to a two-year low of 4.1 per cent in the three months to August, according to new figures published on Wednesday by Incomes Data Research.

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A pick-up in public sector pay growth meant the median award across the economy as a whole remained stable — a rise of 4 per cent.

Zoe Woolacott, senior researcher at IDR, said the public sector was “currently in the catching-up phase, after a lengthy period in which pay awards lagged behind those in the private sector”. But she added that if inflation fell further, “pay awards are likely to follow it, eventually”.

IDR’s figures corroborate similar data published by the research group Brightmine last week, which showed most annual pay awards were bunched around the 4 per cent mark in the three months to August, with fewer employers handing out bumper payouts.

Sheila Atwood, content manager at Brightmine, said this was due not only to the recent fall in inflation, but also reflected a weaker labour market where “the number of under- or unemployed individuals is starting to outpace the number of job openings”.

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The BoE is keeping a close watch on these indicators of pay growth, as well as on official earnings data and its own business surveys, as it seeks to gauge how far inflationary pressures in the economy are easing.

UK inflation held steady at 2.2 per cent in August — far below its 2022 peak above 11 per cent and close to the BoE’s 2 per cent target. But services price inflation has edged up and this week’s increase in regulated energy prices means headline inflation is also likely to rise at the end of the year.

The BoE left interest rates unchanged last month, after August’s cut to 5 per cent, with governor Andrew Bailey arguing that for inflation to stay low, “we need to be careful not to cut too fast or by too much”.

The more hawkish members of the Bank’s monetary policy committee worry that the pandemic and energy crisis might have triggered a lasting change in the way the UK labour market behaves, with workers able to bargain harder against a backdrop of staff scarcity, and businesses better able to pass on costs to consumers.

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Line chart of Median basic pay award reported to IDS by employers, rolling 3 month period showing UK pay growth is falling on the back of lower inflation

Official data shows that UK average earnings growth, excluding bonuses, slowed to 5.1 per cent in the three months to May — down from last year’s peak, but still well above recent norms.

However, the labour shortages that fuelled wages over the past two years have now dissipated. Adzuna, the job search engine, said last week that competition for jobs was at its highest level in three years, with more than two jobseekers for every vacancy after the number of jobs advertised in August fell 17.5 per cent compared to a year earlier.

Tony Wilson, director at the Institute for Employment Studies, said that with competition for jobs “returning to more normal levels” and employers “filling their jobs pretty quickly”, this “should give the Bank of England a bit more confidence on future interest rate cuts”.

Economists at Goldman Sachs said on Tuesday that there was “significant room for private sector pay growth to normalise now that price inflation has fallen” but that it was still likely to remain above long-run averages, with public sector wage growth also set to remain firm on the back of recent pay deals.   

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Louvre Hotels Group to offer 1,000 more keys in Saudi Arabia by 2027

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Louvre Hotels Group to offer 1,000 more keys in Saudi Arabia by 2027

Louvre Hotels Group has announced plans to launch 1,000 additional keys in the kingdom of Saudi Arabia within the next three years

Continue reading Louvre Hotels Group to offer 1,000 more keys in Saudi Arabia by 2027 at Business Traveller.

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Comparing tax to Mafia ‘pizzu’ was inappropriate

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Banker all-nighters create productivity paradox

The comparison that your FT Money columnist Moira O’Neill draws between the Mafia “pizzu” and tax is inappropriate and wrong (“Should you ‘fill to the max’ on tax-free allowances?”, Opinion, FT Money, FT Weekend, September 21).

Pizzu is an illegal payment extracted by organised crime groups, through threats of violence or intimidation, in exchange for “protection”. Taxation, on the other hand, is at the core of the social contract between the state and its citizens and is based on governance and accountability.

In modern democracies, taxes are legally enforced contributions to fund public services such as healthcare, education, infrastructure, defence and social welfare. Transparency and accountability mechanisms exist to prevent misuse of tax revenues.

The level of taxation — and public expenditure — depends on voters’ preferences, and tax rates and spending are typically decided by elected representatives. Citizens can vote, engage in protest, or influence policy to change how taxes are levied or spent.

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Some societies may prefer, for instance, to restrict the range of public services in exchange for a lower level of taxation and let services such as healthcare to be mostly privately funded.

Modern democracies began with the citizens’ demand to have a say on how much they pay and to no longer be burdened with taxes decided elsewhere — no more taxation without representation.

Taxes are often perceived as unfair, but drawing a comparison with the pizzu confuses purposes, context and legality — or lack of it. Above all, it overlooks the fundamental role of democracy, governance, law, and the provision of public services and collective goods that taxes support.

Paola Subacchi
Professor of Economics, Sciences Po, Paris and Essential Economics, London W1, UK

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Letter: Politicians are ‘Fachidioten’

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Banker all-nighters create productivity paradox

Just a small feedback on Janan Ganesh’s piece on “The end of the popular politician” (Opinion, September 26).

It may well be that a spoilt vote reflects a general dissatisfaction with politicians. But I would rather say that voters can’t be fooled so easily any more. The requirements of a politician have not changed much for at least half a century. Almost by definition, politicians of western democracies are amateurs. Even worse, politicians refuse to raise the standards of their profession.

Singapore is a pretty good example of how professional politicians can do a much better job than their western “amateur” counterparts. Or let me use a word from my German mother tongue — Fachidiot — which means a one-track specialised idiot, who is an expert in his or her field but takes a blinkered approach to multi-faceted problems, what you might call an expert idiot. That describes our politicians.

What the west needs is minimum standards for politicians, which are generally accepted for the profession. When an employer searches for a medical doctor, why would we look for qualifications fitting a carpenter?

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We demand licences for drivers, lawyers, doctors and many other professions. By contrast, any idiot can be a politician!

Matthias Abold
Chumphon, Thailand

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Critique of Streeting’s diagnosis for the NHS

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Banker all-nighters create productivity paradox

Wes Streeting’s comments to the FT Weekend Festival on suggested remedies for our ailing and failing NHS (Report, September 7) made good sense yet seemed short-sighted.

Apart from an essential question of how will his mooted expansion and tightening of services be funded and supported, there seem serious limitations in Streeting’s understanding of many aspects of healthcare. In brief, the health secretary’s suggestions may be effective for procedurally curable conditions (treatment-based), but are often unsuitable for those many problems that cannot be decisively fixed (the care-based).

Streeting (and many other health pundits) are correct in their championing of more and better technologies to deliver speedier and better impersonal treatments.

Yet, in fact, the bulk of NHS consultations are not of this kind. Most treatments are “people-work”, where any science or technology is skilfully subordinated to attuned understandings of personal experience, relationship and meaning. This is pastoral healthcare.

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The kind of technologies that are now so indispensable to — say — the highly efficient tracing, tracking and treating certain malignant diseases, are often less than helpful in dealing — say — with a rebelliously recalcitrant and chaotic adolescent diabetic, or an embitteredly grieving widow who turns to drink.

For all its inconsistencies and technological primitiveness, our erstwhile NHS was often able to provide pastoral healthcare far more readily.

This was due largely to a system that encouraged personal bonds and understandings — for example, small local GP practices with personal lists, hospital consultant-led firms with designated wards and support teams.

We cannot now, of course, exactly replicate those times, but we can re-view them, take and replant their more vital “cuttings” into our now humanly impoverished and troubled NHS.

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Will this new government have the wisdom and courage to do this?

Dr David Zigmond
Executive Committee, Doctors for the NHS, London N8, UK

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Rove Hotels and IRTH Group to launch Rove Home branded residences in Dubai Marina

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Rove Hotels and IRTH Group to launch Rove Home branded residences in Dubai Marina

Rove Hotels has announced that it will be collaborating with IRTH Group to launch the Rove Home Dubai Marina, a new residential development in the heart of Dubai Marina. Marking an exciting new chapter for the dynamic UAE-based brand, the new development promises a unique style and innovative spirit for a fresh, vibrant take on modern living.

Rove Home Dubai Marina will be offering buyers the chance to secure an off-plan property in this highly coveted neighbourhood.

Continue reading Rove Hotels and IRTH Group to launch Rove Home branded residences in Dubai Marina at Business Traveller.

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Mexico’s first female president takes power with pledge of continuity

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Mexico’s first female president, Claudia Sheinbaum, took office promising continuity with her predecessor and hitting back at critics who fear the country is sliding away from multi-party democracy.

Sheinbaum, a former Mexico City mayor, has sweeping powers to change the constitution after a landslide election victory but will be limited by the political confines laid out by her mentor, outgoing president Andrés Manuel López Obrador.

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In a firm speech to lawmakers, Latin American presidents and US first lady Jill Biden on Tuesday, Sheinbaum praised López Obrador and pledged to maintain his social policies while emphasising women’s rights, green energy and new passenger railways.

She also hit back at criticism that her government would continue López Obrador’s erosion of democratic norms.

“Anyone who says there will be authoritarianism is lying,” she said in the lower house after her swearing-in. “We are democrats, human rights will be respected.”

Sheinbaum takes office as swaths of the country are living under the control of organised crime, an already-weak economy is slowing and Mexicans are grappling with a sharp deterioration in public healthcare.

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The ruling party Morena has consolidated power over the past six years, including holding two-thirds of governorships and congress, while López Obrador has weakened checks on presidential power.

Sheinbaum’s technical style and background as an energy academic have led some to believe she will make a break from her populist predecessor. But her inaugural address signalled continuity, which could trouble critics and opposition figures who fear she will maintain López Obrador’s policies to defund, attack and eliminate Mexico’s independent institutions.

“There’s nothing that indicates a change in . . . how power is exercised,” said opposition lawmaker Claudia Ruiz Massieu. “The coming years are going to be very complicated for those of us who don’t agree with the regime.”

The country’s polarised politics were evident on the streets of the capital on Tuesday. Hundreds marched against a controversial overhaul of the judiciary, while tens of thousands of Morena supporters, buoyed by the party’s social programmes and rising wages, filled the main square, waving flags and chanting for the outgoing leader.

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“This is history in the making . . . as women, we’re counting on her to give us all her support, just like the president [López Obrador] did,” said Graciela Hernández, 62, who came out to support Sheinbaum.

Sheinbaum is a longtime activist who grew up in leftwing intellectual circles. On Monday, Colombia’s President Gustavo Petro told media she used to be a member of M-19, the urban leftist-nationalist guerrilla group to which he also belonged. A spokesperson for Sheinbaum did not respond to a request for comment.

The incoming president inherits Mexico’s largest budget deficit since the 1980s. Sheinbaum has said she would be fiscally responsible and maintain a “reasonable” debt level but has also promised new social programmes and significant public infrastructure investment.

“The fiscal situation is not what she painted, there will have to be significant cuts,” said Luis Rubio, chair of the independent México Evalúa think-tank. “She’ll have to move away from [López Obrador], and I think that’s the moment in which politically it’s going to be very complicated.”

Sheinbaum has also promised to present a national energy plan in the coming days with ambitious renewables targets, though how she will reconcile those goals with her commitment to state dominance of the sector is unclear.

Lacking López Obrador’s charisma and facing a mounting list of challenges, Sheinbaum will not have long to flesh out her plans.

“Her strengths are not in politicking or narrative building, so she’ll have to deliver,” Rubio said.

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