Box sets » GDP by income » Average earnings

Measuring labour market slack
In the 2018 Economic and fiscal outlook we discussed how the unemployment rate – which had fallen to its lowest level since 1975 – may not necessarily give a complete picture of the extent of labour market slack. This box therefore looked at some other measures, some of which suggested there could be more spare capacity than was captured by the unemployment rate at that time and some of which could be used to argue that there was less.
PAYE income tax and the distribution of wage growth
PAYE income tax is the Government’s single most important source of revenue, and one where our forecasts since 2010 have tended to be revised down over time. In this box from our March 2017 Economic and fiscal outlook, we explored the role that changes in the distribution of earnings might have played in explaining the shortfalls in income tax receipts.
The effects of the National Living Wage
In July 2015, the Government announced the ‘National Living Wage’ (NLW) for workers aged 25 and above. This box from our November 2015 Economic and fiscal outlook outlined how revisions to the wider economy forecast affected our NLW forecast and also explored some of the potential labour market and employer responses to the NLW.
Productivity, wages and the cost of living
In the years following the late-2000s recession, productivity growth remained subdued, which would be expected to lead to lower wages. This box showed that while the real product wage grew more strongly than productivity growth since 2008, real consumption wage growth was weaker.
Our general government employment (GGE) forecast is based on projections of the growth of the total government paybill and paybill per head, which is in turn based on the Government's latest spending plans. In this box we compared our GGE forecast against the outturn data since the start of the 2010 Spending Review period. This allowed some assessment of how public sector employers were progressing with their intended workforce reduction and how much adjustment would still be required.