'No explosion' in City pay

NEW research on earnings in the financial services industry is believed to show that wage costs rose unexpectedly slowly in the decade up to the early 1990s, and did not harm the competitiveness of the City of London.

An as-yet-unpublished report for the City Research Project is thought to conclude that, far from suffering from soaring earnings, wage rises had little effect on business in the Square Mile.

The slowness of increases in some part of the financial industry may even have helped competitiveness at a time when employment was growing rapidly.

Specialists in some parts of the financial industry such as securities did experience an explosion in earnings, because skills were in short supply.

But on average this did not run ahead of the growth of the businesses concerned.

The research is thought to confirm there was also little spillover of wage pressures from highly paid City firms into other slower-growing businesses in the financial industry in the City.

This contradicts the widespread impression that the financial services industry as a whole - including banking, insurance and financial sales forces - has been suffering a decade-long wages explosion.

In fact, financial staff have not been receiving large premiums for their work, a moderation that has left their employers with high profits and funds to invest for further expansion.

The research appears to confirm that the financial services labour market is highly flexible. So with the growth in banking annd insurance employment going into reverse in the past few years, wage rises in the financial industry may now be even more moderate than they were in the 1980s.