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Loss of low-paid jobs behind 'rising wages' figure for Scots workers

THE loss of lower-paid jobs may be behind new figures that show average weekly wages growing faster in Scotland than in any other part of Britain, according to a leading economist.

The surprise data from the Office for National Statistics' (ONS) 2012 Annual Survey of Hours and Earnings shows the median weekly earnings of Scots, at £497.60, were higher in any part of the UK outside London and the southeast, growing 2.6% year on year.

However, David Bell, professor of economics at Stirling University, said he was "a little surprised" by the ONS figures and warned that the rise may be a symptom of an increased loss of lower-paid jobs, pushing the median figure further up the scale.

He said: "What might have happened is that a lot of the people who lost their jobs in Scotland are at the bottom end of the wage distribution, and if falling employment is concentrated in the bottom, that moves the median up.

"Our labour market performance hasn't been that great lately and the unemployment trend has been going in the wrong direction for a few months. Paradoxically, rising median rates may be consistent with that.

"It doesn't necessarily mean that the economy is booming. I don't think there is evidence of great [upward] wage pressure in the Scottish economy."

The rate of pay growth in Scotland was described by STUC assistant secretary Stephen Boyd as "mildly encouraging", but, he added that it was "hardly a cause for celebration" given the significant decline for women workers, and the overall fall in real wages.

While this figure represents a real terms fall, in light of CPI inflation of 3% during that period, it is higher than any part of the UK with the exception of Northern Ireland, which saw a 3.3% rise year on year (5.3% for women).

While men's wage increases in Scotland kept pace with inflation at 3%, women were significantly under at 0.6%, the slowest rise in the UK other than in northeast England, where women's wages fell by -0.5%.

Former Scottish Government economist Paul Teasdale said: "The Scottish median is 98% of the UK median [at £506 per week] and is higher than in any other part of the UK except London and the southeast, which is consistent with the relatively high level of GDP per head in Scotland.

"The rise in the UK median wage was 1.5% compared with a rise in the CPI over the same period of 3%, while in Scotland the rise of 2.6% was higher than in any part of England. This is consistent with a smaller fall in output in the recession.

"The figures show a slightly smaller gender pay gap in Scotland than for the UK as a whole. The median hourly wage rate for women in full-time jobs was 8.4% less than for men compared with 9.6% for the UK as a whole, though within Scotland that gap had widened in the past year as wages for men increased faster."

The median is defined as the level with half the population below and half above, and is a more useful indicator than the mean figure (£607pw) which is distorted by a handful of high earners.

However, Boyd said: "While it's mildly encouraging that wage growth is more robust in Scotland than most other parts of the UK, falling real wages are hardly a cause for celebration. Women workers in particular have seen a very significant decline.

"There is nothing in these figures to suggest that consumption will drive a sustainable recovery any time soon. Most workers are still experiencing what [Bank of England governor] Mervyn King has described as the longest period of falling real wages since the 1920s."

David Lonsdale, assistant director of CBI Scotland, said: "Demand for highly skilled staff in key sectors such as oil and gas, engineering and ICT may well explain the leap in pay rates in the private sector identified by the ONS. Pay restraint in the public sector is likely to continue, given the huge deficit in the public finances and with the national debt expected to swell by a further £250 billion over the next four years."

Earlier this month the ONS recorded a rise in unemployment of 4000, bringing the total for the period between July and September 2012 to 218,000. The Scottish unemployment rate is now 8.1%, above the UK-wide average of 7.8%. Employment in Scotland also fell by 27,000 over the three months to stand at 2,472,000.

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