Real wages will remain depressed, says Beatson – and four-generation workforces are becoming a reality
Real wages have not risen since the financial crisis, says CIPD chief economist Mark Beatson, and the chances of positive financial news for employees will remain minimal for some time to come.
Speaking at the CIPD 2014 Annual Conference and Exhibition in Manchester, Beatson said that when average salaries were matched to the Consumer Price Index (CPI), they had fallen steadily since the onset of the financial crisis. And with a predicted interest rate rise and the wider economy still “a long way from powering ahead”, employers shouldn’t expect to be able to boost earnings any time soon.
“The cost of living crisis isn’t a pre-election frenzy,” said Beatson. “Even if the economy recovers, workers won’t feel better off. That is a real challenge for how we keep people motivated and committed. We can’t make people happier and more fulfilled simply by giving them pay rises.”
The prognosis is borne out by the most recent CIPD Labour Market Outlook, which found employers predicting annual pay increases of just 2 per cent, a level unchanged since the start of the year. At the conference, information provider ECA International said a survey of British businesses indicated 2015 pay increases would run just 1.2 per cent above inflation.
Lack of productivity growth explained the underlying trend, added Beatson: “Although we’re all working very hard, we’re not producing more value per hour then we were in 2008 and that is why wages haven’t risen.”
Outlining wider trends that would affect HR professionals in the years ahead, Beatson said the growth in the rate of employment among the over-50s was hugely significant. For the first time ever, there are now one million over-65s in the UK workforce and Beatson estimated that could rise to three million in the next 20 years.
“That will have pretty profound implications for the workplace,” he said. “You could eventually have somebody managing an employee 50 years younger or older than them. “
Providing a practical perspective on such shifts, Catherine Taylor, group HR director of Mercedes-Benz UK, said the ability to spot macroeconomic trends and identify their implications is one of the key attributes business leaders believe HR directors will need to develop over the next five years.
“CEOs expect us to ask questions of the business,” said Taylor. “They expect us as HR professionals to enable and support strategies that deliver business results, specifically building operational and people capabilities.”
Leadership was the critical component at the German carmaker, she added: “We have to get the right people in the right place to develop and motivate teams. Getting good people is hard. And if you’re lucky enough to have them, everyone wants to get hold of them.” Mercedes-Benz has created development and retention plans for all its key employees, but the interventions can be more prosaic: with pay rises less effective in motivating staff, it has emphasised the importance of celebrating successes as a way of ensuring people are engaged and valued.