Andrew Bailey, the governor of the Bank of England, sparked controversy recently with his suggestion that workers should not be asking for big pay rises – despite facing the worst cost-of-living crisis in a generation.
Bailey called for moderation in a bid to control inflation, which officials expect to hit 7.25 per cent in April.
While the governor was rebuked by the Prime Minister for his suggestion, research from recruiter Randstad UK indicates Bailey’s comments may not have been entirely misguided.
When asked if the governor’s calls for restraint in the pay bargaining process would make a difference to them, 35 per cent of employees told Randstad that they would (while 55 per cent said they would not).
Victoria Short, chief executive of Randstad UK, said: “I am, I admit, stunned by the findings. It’s bizarre that people might willingly throw away their material aspirations because the governor of the Bank of England has asked them to. Perhaps the age of deference is not dead? I don’t think we’ve seen anything like this since 1977 – it harks back to the 70s when unions pledged to do their bit to keep wages below inflation as part of a social contract. The results of this poll suggest the Prime Minister was wrong to have rebuked Andrew Bailey.
“Perhaps society is experiencing an altruistic surge in the wake of the pandemic? Or people may not be looking for a pay rise despite inflation because flexibility and hybrid working might have been a kind of pay rise. If you need to commute less frequently, your involuntary expenditure falls – and you see a big increase in your after-tax, discretionary spending. You may even be able to move slightly further away from the office. So people may have made the decision that they’d rather reserve their negotiating power for locking into more flexibility in the face of demands to return to the office. Whatever the reason, while the market dictates pay and wages are no longer set by national policy, it turns out that plenty of professionals were listening to the governor.”
Average wage pay, excluding bonuses grew by 3.8 per cent in the three months to November 2021, in part because of tight awards in 2020.
There are indications that wage pressure could continue. Very few people who want a job do not have one, which gives those in work greater power in wage negotiations. As food and energy prices rise, employers are bracing themselves for pay demands to grow louder.
When asked whether the Bank was implicitly asking workers not to demand big pay rises, Andrew Bailey told BBC Radio 4’s the Today programme: “Broadly, yes.”
“We are looking, I think, to see quite clear restraint in the bargaining process because otherwise it will get out of control… It’s not at the moment but it will do. I’m not saying nobody gets a pay rise, don’t get me wrong, but I think what I’m saying is we do need to see restraint in pay bargaining otherwise it will get out of control.”
While he acknowledged it would be uncomfortable for workers to accept that prices would rise faster than wages, he said some moderation of wage rises was needed to prevent inflation becoming entrenched, adding: “In the sense of saying, we do need to see a moderation of wage rises, now that’s painful.
“I don’t want to in any sense sugar that: it is painful. But we need to see that in order to get through this problem more quickly.”
Victoria Short said: “People have written-off the governor’s comments as ‘Marie Antoinette insouciance’, ‘misjudged’, and ‘socially-oblivious’. But against all the odds – they might pay off. I don’t envy him delivering the message though.”
Randstad said it expects median pay settlements to rise above 3 per cent this year, compared to an average of around 2 per cent over the 2010s.
