Bulletin

Rise in low-skilled jobs blamed for static wages

Bank of England deputy governor Ben Broadbent has indicated that poorly skilled migrants and a reluctance to invest could be behind depressing wage growth and productivity. He said that the skewing of employment growth towards the lower paid and lower skilled helped explain why pay pressures were so weak. The Bank has been caught out by the failure of wage growth to pick up despite the strong increase in employment since the recovery began to pick up pace in early 2013, but Broadbent said this was because the present recovery had been more biased towards low-paid jobs than the upturn from recession. He added that hiring had been driven by low-skilled posts that often paid less than typical jobs before the crisis, pushing down on average rates of pay growth and productivity. Broadbent said the Monetary Policy Committee had to take changes in the composition of the workforce into account when setting interest rates. Broadbent also pointed out that a strengthening recovery in the rest of Europe would reduce the relative supply of low-skilled labour 'and a fall in risk premia on new investment, in human as well as physical capital, would raise the demand for high skills.'


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