Wages fall behind soaring inflation again despite pay hikes

Inflation: Price to be paid says expert

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New figures released this morning by the Office for National Statistics (ONS) reveal that regular pay fell by 2.9 percent over the course of the last year. Meanwhile, real total pay, which includes bonuses, fell 2.4 percent over the period. According to the ONS, this is one of the largest falls seen since records began in 2001.

Growth in the average total pay, which includes bonuses, was six percent and growth in regular pay, excluding bonuses, was 5.4 percent among employees between June and August of this year.

The ONS data showed the unemployment rate for June to August 2022 decreased by 0.3 percentage points in the quarter to 3.5 percent.

This is the lowest rate the UK has seen since 1974. 

In September, Britons on payroll increased by 69,000 to 29.7 million and between July and September, the estimated number of vacancies fell by 46,000. 

This is the largest fall the UK has seen since 2020. 

However, even with this growth runaway inflation is continuing to overtake pay packet hikes.

The level of inflation in the UK dropped slightly to 9.9 percent in August from 10.1 percent in July.

This remains close to a 40-year-high, hitting pockets significantly.

The ONS is set to announce the September inflation rate next week on October 19. 

According to figures from the BBC, the cost of the weekly shop has increased by 14 percent over the course of this year.

This means that the average yearly shopping bill has increased by around £634. 

Alice Haine, personal finance analyst at Bestinvest, commented: “Britain’s cost-of-living crisis is continuing to batter real wages – the purchasing power of worker’s pay after factoring in inflation. 

“The hit to pay growth magnifies the financial struggle for workers who are not only having their incomes eroded by high food and energy prices but also the growing cost-of-borrowing crisis. 

“The harsh reality is that employee spending power is now heavily hampered by rising costs and with inflation expected to peak above 11 percent this year, wages will get stretched even further.” 

On the labour market, Aude Barral, CCO of the tech recruitment platform CodinGame described it as having “slipped into suspended animation” rather than having “crashed”. 

She said: “The number of job vacancies has begun to fall sharply as thousands of employers rethink or freeze their hiring plans. 

“Vacancies have now declined for three months in a row and this trend is likely to continue as business confidence shrinks. However, on the recruitment line, things are still tight as the number of potential candidates continues to shrink. 

“Even with a flatlining economy, Britain’s unemployment rate isn’t far off the lowest level seen in nearly five decades and thousands more people continue to become ‘economically inactive’ by dropping out of the labour market entirely.”

As a result, Ms Barral the number of unemployed people per vacancy has fallen which means that the ongoing competition among employers for the best talent is the likely reason for the rise in wages. 

The ONS figures revealed economic activity increased by 0.6 percentage points to 21.7 percent and this was driven by people aged between 50 and 64.

Commenting on this figure, Steven Cameron, pensions director at Aegon said: “As the Government focusses on growth, employment figures are vitally important. 

“Within this, particular focus is needed on the over 50s including the 50 to 64 age group where the number who have taken themselves out of the workforce remains particularly high – at least partly a legacy of the Covid-19 pandemic.” 

Mr Cameron stated older workers need to be a “key part” of the Government’s growth agenda as they have “valuable skills, expertise and experience” which will be needed in the UK jobs market.

He added: “With the state pension age increasing again to age 67 in 2028, and with further increases penciled in, remaining in work for even a couple of extra years can offer a powerful way to boost pension savings.”

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