THE PICTURE seemed to be crystal clear. With pay packets getting smaller, and Bank of
But irrespective of which way Carney is currently directing markets, the economic fundamentals are not as clearcut as some people think. It may seem straightforward - falling wages mean no rate hike. Yet digging into the data reveals three possible reasons as to why the official wage figures are so weak, and this makes the whole issue more questionable. Let's take a look at them.
1. Bonuses. As the
3. Pensions and other non-wage contributions. Some economists suspect that new legal obligations on employers to enrol staff in pension schemes (and, crucially, put money into those schemes) is restraining them from handing out steeper pay rises. Last week it was revealed that more than four million workers have now been auto-enrolled - that's nearly 16 per cent of all employees, and the number is rising. This is important, because the cost of jobs has a direct bearing on all of our wages. Analysis by the Treasury last year also suggested that total compensation - which includes all employee benefits,
Our front page story today contains the suggestion that Carney has already agreed to keep rates anchored. Let's hope this isn't the case. The data on wages is complex, and a decision as important as this one requires the Bank's boffins to be engaging constantly in sophisticated analysis and debate.
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