Real pay is set to increase by 1.9% in 2015, with UK employees set to enjoy their first increase in wages since 2007, according to research by economic forecaster, EY Item Club.
Its latest report on the labour market found that wage growth is expected to continue to accelerate, underpinned by negative inflation (it dropped to 0.3% in January), but will remain short of the pay rises seen prior to the financial crisis.
The report predicts that wages are forecast to grow by 3.7% in 2018, which is 0.7% short of the pre-2007 average.
The EY Item Club report also found that the number of older staff remaining in work has increased by 1.1 million since the end of 2009, representing 90% of the increase in the total UK workforce.
Martin Beck, senior economic advisor to the EY Item Club, said: “Real earnings have fallen by nearly 10% since 2008, but employees will finally see more money in their pockets this year.
“However, this is not a normal recovery. The move towards later retirement and the huge increase in the size of the workforce has depressed real wages as employees have priced themselves into jobs.
“We don’t expect a return to boom time wage growth any time soon.”
Tom McCabe, human capital advisory partner at EY, added: “This growing diversity of the workforce means organisations and their HR functions have to manage a labour pool that looks very different from before the financial crisis.
“As the workforce becomes more diverse, so do its motivations and priorities. To manage this diversity successfully, organisations will have to radically change their employee offer with reward structures, training, and incentives all geared to meeting a wider range of needs and aspirations.”