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.
