Employers will resist calls for wage increases as long as unemployment levels continue to rise, according to the Chartered Institute of Personnel and Development (CIPD).
The views are based on the CIPD’s Labour Market Outlook report, due to be published next week, which found that unemployment was set to increase for some time to come.
“The much expressed fear that a high and rising retail price index will start to trigger big pay demands looks increasingly unfounded,” said Dr John Philpott, chief economist at the CIPD.
“Rising unemployment is helping employers resist demands for higher pay,” he added.
However, Philpott expressed concern that wages are failing to keep up with the cost of living and warned that personal debt levels could increase.
“While this may ease concern about the outlook for inflation, a continued squeeze on living standards at a time when many people are burdened with high levels of debt could spell trouble for the economy next year, especially if interest and mortgage rates were to rise above 5%,” Philpott said.
The organisation has cited a combination of high immigration and a rise in the number of ‘home grown’ people entering the jobs market, as the underlying cause for the predicted rise in unemployment.
The CIPD also suggested the growing number of older workers, many above state pension age, was also contributing to the size of the labour pool growing faster than labour demand.
© Crimson Business Ltd. 2006
