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Higher employment costs threaten bumper UK jobs figures - IoD

18 Feb 2016

The Institute of Directors has responded to official figures which showed the unemployment rate was steady at 5.1% and wages grew by 1.9% over the last year, saying that the UK’s strong record on employment remains a “bright spot” of an otherwise turbulent global economy, but warning about government policies which will raise the costs of employment over 2016.

James Sproule, Chief Economist at the IoD, said:

“The UK’s strong employment remains one of the few bright spots in a world where there are an increasing number of economic uncertainties. Wage growth may appear modest in nominal terms, but this could be a feature of impressive increases in the number of young people who are in work. Moreover, with inflation still in the doldrums, real wage growth is providing a boost to employees and underpinning the UK’s consumer-led growth throughout 2016. But don’t bank on the lines continuing to go in right direction for ever.

“With pension auto-enrolment kicking in for many small firms this year, at the same time as the apprenticeship levy – essentially a payroll tax – and the National Living Wage, the cost of employing people is shooting up. How businesses will respond to these policies remains open to debate, but cumulatively, they are set to cost firms billions and could lead to low-skilled workers being priced out of the job market. The government must be aware of this, and resist any further moves which make it even more expensive to create jobs.”

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