Manual workers paid more as South-east job market tightens

The booming economy in the South-east has made the region's labour market so tight that councils are offering extra pay to recruit and retain core staff like cleaners and caterers, according to a report out today.

The booming economy in the South-east has made the region's labour market so tight that councils are offering extra pay to recruit and retain core staff like cleaners and caterers, according to a report out today.

The survey of public sector trends, by labour market analysts Incomes Data Services, also highlights severe shortages of IT staff and social workers across local government in areas where the economy is at, or close to, full employment. Soaring house prices have combined with a shortage of workers to reduce the pool of available employees, IDS said.

The picture is mirrored in the private sector. Shortages of highly skilled professionals such as IT and financial staff have been reported for some time, but the problem is now filtering down to manual workers.

The Federation of Master Builders said more than two-thirds of its members reported difficulties obtaining a sufficient supply of skilled labour. The situation was most acute in East Anglia (77 per cent) and the South-east (75 per cent).

IDS said the tight labour market was starting to boost pay awards in councils. It also found wide variations in pay awards within councils that had opted out of the national bargaining agreement. Top of the league was Mole Valley council in Surrey, which agreed a 4.1 per cent deal pay deal, against a national award of 3 per cent.

Guildford, the Surrey market town, said it was considering introducing market supplements across the board since it was difficult to recruit care, cleaning and catering workers as well as professional staff. "This experience has been shared by other councils in parts of the South-east where there is virtually full employment and relatively high housing costs," IDS said.

Unemployment is currently at a 20-year low and in parts of the South-east the pressures are even more intense. Mole Valley has the lowest claimant count employment rate outside the City of London, at 0.5 per cent, and Runnymede in Surrey has a rate of 0.7 per cent.

The South-east also has the highest rate of house price inflation, which makes it increasingly hard for low-paid workers to find affordable accommodation. Last month the Metropolitan Police agreed to a living allowance of £6,000 to help recruit officers. This was twice the level offered even by the major investment banks.

The labour market is a key concern for the Monetary Policy Committee of the Bank of England. The Bank is baffled by recent falls in growth in average earnings despite the increasing tightness of the labour market.