LONDON - The VocaLink Take Home Pay Index Falls Dramatically From 1.6% to 1.1% in May
- Manufacturing Wage Growth Drops to a New All Time Low of 1.1%
- Service Sector Take Home Pay Plummets to a Record Low of 1.0% in May
The VocaLink Take Home Pay Index has continued its rapid decline this year to reach a new all time low of 1.1% in May. This unprecedented fall in take home pay has been driven by the deterioration in the labour market, with unemployment at its highest since 1996, falling inflation and the slashing of discretionary bonus payments enabling firms to pass through weak wage settlements.
The VocaLink Take Home Pay Index is an important aspect of the UK’s economic performance and one of the components that drives the Bank of England’s Monetary Policy Committee’s (MPC) interest rate policy.
The fall in the VocaLink Take Home Pay Index for the sixth consecutive month is a result of record lows in both the VocaLink industry and services sub-indices. Wage growth in the manufacturing sector dropped from 1.4% to 1.1% in May, again highlighting that manufacturers have been hardest hit by the economic crisis. Similarly, take home pay growth in the service sector fell more sharply from 1.7% to 1.0% in May, showing the disproportionate effect falling bonus payments have in this sector.
Helen Ritchie, marketing director at VocaLink, said, “With the VocaLink Take Home Pay Index at an all time low, the huge impact of reduced bonuses and the weak labour market continue to be reflected in wages across all sectors. Take home pay growth has now fallen a total of 3.4% since July last year.”
Commenting on the latest VocaLink Take Home Pay Index, Douglas McWilliams, chief executive of economics consultancy cebr, said, “With wage growth remaining at a record low, the key issue for the Bank of England going forward is how far to extend the quantitative easing scheme and when to unwind it. We expect the Monetary Policy Committee decision in June to be uneventful, with interest rates on hold and no extensions to the quantitative easing scheme.”
VocaLink processes over 90% of UK salaries and the VocaLink Take Home Pay Index, established in 2004, provides 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.
The VocaLink Take Home Pay Index series Three month average annual change Year 2008 2009 Month May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May % % % % % % % % % % % % % VocaLink Take Home Pay Index 4.1 4.3 4.5 4.1 4.0 3.4 3.5 2.9 2.7 2.4 2.0 1.6 1.1 VocaLink Industry Index 2.9 3.9 5.4 4.3 3.1 2.4 2.3 2.4 1.4 1.5 1.2 1.4 1.1 VocaLink Services Index 4.8 4.6 3.8 3.9 4.3 4.1 3.9 3.0 3.1 2.9 2.4 1.7 1.0
About the VocaLink Take Home Pay Index
The VocaLink Take Home Pay Index tracks monthly take home pay levels in the UK. VocaLink is the processor for automated payments in the UK on behalf of Bacs, including all Direct Debit and Bacs Direct Credits, which account for over 90% of salary payments delivered into employees’ bank accounts. The VocaLink Take Home Pay Index is compiled using the data captured from the salary payments of 100 of the FTSE 350 companies, courtesy of Bacs.
VocaLink works with the centre for economics and business research (cebr) to deliver the analysis of this powerful and timely indicator of take home pay inflation to economists, analysts and the media. It is an important aspect of the UK’s economic performance and one of the components that drives the Bank of England’s Monetary Policy Committee’s (MPC) interest rate policy. The VocaLink Take Home Pay Index is also split by broad sector group into two sub-indices - the VocaLink Industry Index and the VocaLink Services Index.
Notes to Editors For further information or to receive the full report please contact: Gerald Cross at The JJ Group +44(0)1865-343100 vocalink@thejjgroup.com
Source: VocaLink
For further information or to receive the full report please contact: Gerald Cross at The JJ Group, +44(0)1865-343100, vocalink at thejjgroup.com
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