Employment growth looks set to continue through 2014, with even upwards-revised OBR forecasts of increases in employment and falls in unemployment looking conservative, according to Mark Beatson, chief economist at the CIPD, the professional body for HR and people development. However, with employment now having exceeded expectations for two consecutive years, he warns that 2014 needs to be a “year of productivity” if we are to see wages rising faster than prices.

In his annual analysis of the labour market for the year ahead, published today, Mark Beatson highlights:

  • The unprecedented milestone of 30 million people employed in the UK has already been reached; only a year ago the OBR was predicting this would not happen until Autumn 2015.
  • There is a high likelihood that employment will rise by more than the forecast 300,000 during 2014, and even by as much as 500,000.
  • Rising employment could push unemployment below the Bank of England’s “magic” 7% rate during 2014, triggering a review of current monetary policy earlier than expected.
  • 2013 was the fifth calendar year in a row when average earnings fell in real terms; this is unprecedented in at least the last 70 years.
  • If wages are to rise faster than prices on a sustainable basis, employers and policy makers need to tackle the causes of the UK’s poor productivity performance.

Mark Beatson, CIPD Chief Economist, said: “This time last year we were talking about the UK’s ‘jobs enigma’. Since then, labour market performance has continued to exceed expectations, turning the UK labour market into a ‘jobs machine’. Employment growth looks set to continue at an impressive rate over the year to come. However, the downside is that UK productivity has yet to improve and remains below its pre-recession level.

“A lot of attention is being given to falling real wages and the UK’s ‘cost of living crisis’, for understandable reasons.  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.  This involves tackling the crisis of trust in many organisations, as well as developing better ways of valuing and making active use of the skills and talents of our workforce.While 2012 and 2013 were years when employment exceeded expectations, if both UK competitiveness and real wages are to increase then 2014 needs to be a year in which productivity exceeds expectations.”

The CIPD has recently launched a major new research and engagement programme in collaboration with the UKCES, Investors in People, CMI, CIMA and the RSA to help employers understand how to measure the impact their people have on the performance of their organisation. For more information visit