Scotland business

Resolution Foundation warns over Scottish pay growth

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Pay growth in Scotland could be slower than the rest of the UK because of the job market's "incomplete recovery" from the recession, according to a think tank.

The Resolution Foundation said 9,000 more jobs were needed before Scotland's employment rate returned to the level it was at before the economic crisis.

England closed this "jobs gap" more than a year ago, it said.

Its employment rate now stands at a record 74.3%.

Compared with that, Scotland's rate stood at 74.6% immediately before the recession and reached 74.3% between August and October last year. However, it needs to reach the 74.6% figure to close the jobs gap.

The London-based think tank's report was published ahead of the latest official employment figures, which are due to be released on Wednesday.

It found that while Scotland had experienced a "comparatively disappointing performance" on employment since the financial crash, it had undergone a less severe squeeze on pay.

Typical pay in Scotland is currently 5.7% below its 2009 peak, compared with a drop of 9.1% across England.

Analysis released by the foundation earlier this week suggested that typical pay in Scotland was now marginally higher than in England.

The foundation warned that stronger employment gains would be needed if Scotland were to maintain its new pay advantage.

Its report said: "Scotland's incomplete recovery on jobs may lead to slower pay growth in the future relative to other nations and regions of the UK."

'Pull factors'

Conor D'Arcy, policy analyst at the Resolution Foundation, said: "Scotland enjoyed a significantly higher employment rate than England in the years running up to the financial crisis. But its relatively poor track record in recent years means that it has fallen back in line with England.

"This puts Scotland's new-found pay advantage over England at risk and it's vital that its job gap is closed sooner rather than later.

"Attention must then turn to why Scotland is lagging behind some other areas of the UK, and what can be done to speed up its sluggish employment growth.

"In order to move towards full employment, it is important for employers to offer 'pull factors' to encourage people who may not actively be looking for work to enter the labour market, such as flexible working and paying at least the voluntary Living Wage."

He added: "The next Scottish government should play a central role in fostering such change.

"With new powers over disability benefits and back-to-work programmes, whoever wins in May's election must make it their focus to re-establish Scotland's reputation as a labour market leader."

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