Experienced employees 'forced out'

Employers are dealing with the recession by ditching older and more expensive workers for younger replacements on much lower wages, according to the latest expert report on the jobs market.

The Recruitment and Employment Federation said that, during February, 28 per cent of employers admitted to filling posts with staff on lower salaries than their predecessors. In September, the equivalent figure was 7.7 per cent.

The survey, carried out by Markit Economics and the accountants KPMG reveals that "respondents widely commented that high levels of candidate availability had shifted negotiating power to employers, and consequently salary offers were lower".

Pay rates for temporary and contract workers also fell for a fifth successive month in February and are falling at the sharpest rate since the survey was established in 1997. Vacancies contracted at the fastest rate in more than a decade, while demand for staff in every sector – apart from nursing and medical care – fell again.

Although the Office for National Statistics' figures show that overall pay in the economy is still growing by 3.2 per cent a year, most economists expect this to decline sharply as the dole queues lengthen and inflationary pressures ease in the coming months. Indeed the Bank of England has indicated that inflation on the retail price index measure may turn negative this year, pushed down by lower mortgage payments, fuel and energy prices and the cut in VAT. Consumer price index inflation is also expected to be close to zero by the summer. Thus, even with nominal pay rises some employees may find that their real wages and salaries go further.