Higher wages and long-term productivity can only be achieved by investing in skills, according to the governor of the Bank of England (BoE) Mark Carney.
Mr Carney made his comments while addressing the audience of the annual Trades Union Congress, held in Liverpool September 9th. He said: “We need workers with the right skills. And we need companies taking strategic initiatives to grow productivity. That productivity is needed to secure real wage increases over the medium term.”
According to the BoE governor, there are now over a million more people in employment compared to at the start of the financial crisis in 2008, but pay has plummeted by a tenth in value during the same period.
The UK’s low productivity is a direct result of businesses choosing to hire new workers rather than making capital investments, he added. However, by trading off lower productivity and reduced wages for higher rates of employment, businesses have been able to lay solid foundations for expansion, maximising the prospects for individuals and the economy alike.
“By staying in work, individuals retain and learn new skills and they are better placed to participate in the expansion when it gathers force. This can make a material difference to an individual’s lifetime earnings,” he continued.
Mr Carney told the gathered trade unionists that businesses also need to address issues surrounding pay, as being given a reasonable wage for work is linked to a person’s ability to maintain their dignity.
All 3,600 staff members working for the BoE are paid the living wage, which is currently £7.65 and above. In addition, contracted staff working in the capital are paid the London living wage, which stands at £8.80.
According to the forecasts from the BoE, real wage growth should pick up again around mid-2015 and is predicted to increase by four per cent over the next three years. During the same period, the Bank has estimated that unemployment will drop by 5.5 per cent.
Commenting on Mr Carney’s speech, Len McCluskey, general secretary of trade union Unite, said the governor should have urged businesses to create more employment opportunities and made a stronger call about the need for investment in skills.
Companies can utilise e-learning tools to provide existing employees with new skills, enabling them to move up the career ladder and helping businesses adapt to any changes, such as technological advances.