As the UK jobs market rebalances in the wake of public sector cuts and private sector growth, advertised salaries fall 5.3 percent year-on-year to £31,818 in March, driving the average British pay packet down £1,800 in the last 12 months.

Continued salary stagnation in many industries, with pay slipping furthest in retail, graduate, customer service, and sales sectors. Overall, a positive outlook for the UK jobs market – vacancies increased 24 percent year-on-year, with 841,011 advertised UK vacancies in March, a 5 percent monthly increase. Competition for jobs has fallen 29 percent year-on-year, with 1.42 jobseekers for every advertised vacancy in March. More vacancies than jobseekers in the ten best cities to find a job in the UK. Cambridge was the best city to find a job with six jobs to every job seeker.

Average advertised salaries have slipped £1,800 in the past year as the labour market re-sets itself in the wake of public sector cuts and private sector growth, according to the latest UK Job Market Report from Adzuna.co.uk. Despite widespread optimism around the labour market recovery, the average advertised salary was £31,818 in March 2014, 0.6 percent lower than in February, and 5.3 percent lower than March 2013. Factor in inflation, and average salaries have fallen by £2,358 in real terms over the same period. Salaries have stagnated most in areas like London, where widespread cuts in the public sector have been replaced by significant growth in lower paid, private sector roles.

However, the salary slide is set against a background of far more positive job market statistics. CPI Inflation has fallen to 1.6 percent – the lowest in four and a half years and the third consecutive month below Mark Carney’s goal of 2.0 percent – and unemployment has fallen to 6.9 percent. Adzuna data highlights a strong vacancy growth trend, in line with the falling unemployment rate. There were 841,011 advertised vacancies in March, 24 percent higher than a year before. And competition for jobs fell 29 percent compared to March 2013.

Table 1:

Andrew Hunter, co-founder of Adzuna, explains: “Official indicators for the jobs market are resoundingly positive, but hidden beneath the headline statistics is a more complicated truth. UK salaries overall are still stagnating, with only a select few industries showing pay growth and the market rebalancing itself after the public/private sector shake-up. “Adzuna data gives an unbiased, whole-of-market, leading look at what is happening on the ground for the average Briton. That average jobseeker is still facing the stark reality of seeing a shrinking pay packet on offer. That said, the trend is positive, with the decline decreasing month-by-month and some sectors showing strong growth, but we are still falling short of the true milestone – a growth in real advertised wages for new hires.”

Public sector vs private sector

The UK jobs market is rebalancing itself as a result of public sector cuts and private sector growth; a key factor behind the salary stagnation. Public sector workers generally receive a pay premium of between 2.2 percent-3.1 percent compared to private sector workers,[1] but many public sector jobs have been cut back post-recession. Since the start of 2011, the public workforce has fallen by almost 300,000, with further public sector cuts anticipated by the OBR. While in every UK region, private sector jobs growth has compensated for public sector job cuts,[2] average salaries are still to catch up.

Vacancies have continued to grow despite these public sector job cuts, as private sector job creation outpaced the slim-downs in every region of the UK. This is especially true in London, where eight new jobs in the private sector have been created for every one lost in the public sector.[3] Andrew Hunter, co-founder of Adzuna, elaborates: “The public sector has undoubtedly seen some shrinkage as a result of post-recession budget cuts, and the number of higher paid public workers has fallen. But unemployment is continuing to fall, as private sector job creation more than fills the hole left in the workforce, particularly in the capital.”

Salaries across the nation

Salaries fell year-on-year in many regions of the UK in March, with the exception of Wales (+14 percent) and the North West (+1.0 percent). The greatest fall was in London, where advertised salaries dropped 6.8 percent to £39,112 – equivalent to a drop of £2,854 year-on-year. The capital has also experienced the biggest shift in the make-up of its workforce in the wake of public sector cuts. In 1994-1995, 24.6 percent of the workforce was employed in public sector jobs, but that figure fell to just 20.6 percent in 2012-2013.[4] By contrast, Wales has retained the highest proportion of public sector jobs, with public sector workers still making up 27.7 percent of the workforce, despite sweeping cuts to the public sector workforce across the UK, after the recession.[5] This has allowed average salaries in Wales to increase by 14 percent year-on-year to £28,912. The local economy has also been helped by the job creation initiative Jobs Growth Wales. The government scheme, which is aimed to help young unemployed people in Wales find work, has recently been extended to help a further 4,000 young people find work.[6] Andrew Hunter, co-founder of Adzuna, elaborates: “Although salaries are still falling the length and breadth of the country, there are some bright spots on the horizon. The labour market has been absorbing the loss of many public sector jobs, which has made the salary snapshot look artificially gloomy. Real wages are likely to begin to increase as the recovery continues to take-hold. Output and demand are increasing, and as talent becomes harder to source, employers will need to start increasing wages in order to attract the best staff.”

Table 2:

Sector breakdown

The salary recovery is also being held back by several sectors within the jobs market that have been slower to bounce back from the recession.

Amongst the worst hit of these is the retail sector, in which advertised salaries fell 14.4 percent over the twelve months to March, to an average of £27,002. UK retail sales fell 1.7 percent year-on-year in March, according to the British Retail Consortium.[7] Other sectors that experienced the biggest annual falls were the graduate sector, where average salaries fell 6.7 percent, followed by the customer service (-6.1 percent), sales (-4.4 percent) and IT (-3.6 percent) sectors.

Andrew Hunter, co-founder of Adzuna, explains: “Consumer spending power is still suffering, particularly as wages remain flat, and employers are capping retail salaries as a result. One reaction by supermarkets has been to engage in bidding wars to attract more customers. While this is good for consumers, it may have a negative impact on retail profits, and could be blocking potential pay rises in the retail sector.”

Where are all the jobs?

For the first time, there was more than one vacancy available for every jobseeker in each of the ten best cities to find a job in the UK. Tech hub Cambridge topped the list, with six vacancies to every jobseeker. But there are still many regions in which competition for vacancies remains extremely heated. North West city Salford was the worst city in the UK to find a job, with over 30 jobseekers per advertised vacancy. The situation was only slightly better in The Wirral, where there were over 20 jobseekers fighting for each available vacancy in March. Hull showed strong signs of recovery in last month, despite remaining one of the worst ten cities to find a job. Competition for jobs in Hull fell by over a fifth in March, aided by its City Plan, which aims to create 7,500 local jobs for local people, via a £1bn investment in the city. Hull has also worked to develop its public sector by renewing its schools, health centre and housing infrastructure, which has helped create more jobs locally.[8]