Increase in productivity needed in 2014, CIPD says

RA Now

Productivity must dramatically increase in 2014 if wages are to rise higher than prices, according to the chief economist at the Chartered Institute of Personnel & Development. 

Despite describing employment forecasts from the Office for Budget Responsibility as “looking conservative”, Mark Beatson added that if wages are to rise sustainably, employers and policymakers need to tackle cases of poor productivity in the UK.

Last year was the fifth in a row in which average earnings fell in real terms, unprecedented in at least the last 70 years, he said.

“A lot of attention is being given to falling real wages and the UK’s ‘cost of living’ crisis, for understandable reasons,” Beatson said. “But not enough attention is given to the main reason why this has happened – that productivity has fallen since 2008.

“Skills shortages in certain sectors may inflate wages for some, but if we are to create any realistic prospect of wages rising in real terms across the board, we need to improve productivity. Central to this is business and government acting together to improve the way people are managed, with more emphasis on working smarter and creating value.”

Beatson said the crisis of trust that many organisations experience must be tackled, and better ways of valuing and using the workforce’s skills developed.

Levels of employment have now exceeded expectations for two years running, Beatson said, most recently with the unprecedented milestone of 30 million people employed being reached in December last year. In January last year the OBR predicted this would not happen until autumn 2015.