Wages rise as employers vie for staff

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THE TIGHTENING of the labour market as economic recovery strengthens is being reflected in employers' decisions on pay, according to an analysis of recent pay deals by the research group Incomes Data Services, writes Robert Chote.

Burton Group, the retailer, has awarded its 32,300 shop staff and managers merit pay increases of up to 5 per cent and has switched staff in 18 stores to higher 'pay zones' as employees become more scarce in some regions. These areas include Bournemouth, Bristol (which will now pay outer-London rates) and Richmond (which will pay West End rates).

Next Retail also upgraded 15 stores in its February pay review. 'Such moves are reminiscent of responses to the tight labour markets of the 1980s, when unemployment was around half its current level,' the IDS report concludes.

The IDS study supports last week's figures from the Department of Employment showing that annual earnings growth has picked up slowly since the end of last year. Economists fear that rising earnings growth is a harbinger of higher inflation, even though the headline figures have remained subdued in recent months.