VocaLink’s take home pay index shows divergence in service and manufacturing sector wages
- Overall take home pay index increases to 3.6% in March, continuing the growth trend but 2008 still lags behind previous years
- Service sector pay growth nearly doubled in Q1 (from 2.2% in January to 4.2% in March)
- After early rise manufacturing suffers second significant monthly decline in pay growth
8 April 2008 – This month’s VocaLink take home pay index saw another slight rise from 3.4% to 3.6% in March, continuing the upward trend for 2008. However, despite the overall increase in the rate of take home pay, average wage growth in the first three months of 2008 has been considerably less than in 2006 and 2007. At the end of the first quarter, there are also marked differences between the manufacturing and services sectors.
The manufacturing sub index continues to fall, from 2.9% in February to 2.4% in March, the lowest figure in the last twelve months. Despite an initial rise in January the rate of growth has eased to see a decline of 1.1% in the sector for the first quarter of 2008. This could indicate continuing difficulties for the manufacturing industry.
In the services sub index of VocaLink’s take home pay index, the trend has moved in the opposite direction. Strong growth was again registered with the index matching its highest level over the last 12 months of 3.6%. With a significant increase of 2.0% in the first quarter of 2008, the service sector is driving the rise in overall take home pay.
Richard Cooper, head of marketing and communications at VocaLink, said, “Despite the increase in the take home pay index this month, wage growth in 2008 is significantly down on the previous two years. This is likely to fuel uncertainty for wage earners especially as price rises continue to stretch take home pay and put financial pressure on households.”
Commenting on the latest trends, Douglas McWilliams, chief executive of economics consultancy cebr, said, “The VocaLink take home pay index shows that wage growth has moderated over the year. Given the recent rise in the cost of inter-bank lending and the latest developments in the US finance industry, it is likely that the Bank of England will cut interest rates in April in the belief that modest wage growth will keep inflation under control.”
VocaLink processes over 90% of UK salaries and the VocaLink take home pay index is the most timely and accurate disposable income data available in the UK. It is based on actual payments made to employees on a three-month moving average compared with the same measure a year earlier. It is affected by changes in tax rates, National Insurance and other employer payments or deductions.
Follow this link to read the full statistical report.