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UK workers suffer sharpest fall in living standards since 2013 as real pay falls

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·Finance Reporter, Yahoo Finance UK
·3-min read
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real pay
UK real pay falls for second month in a row. Photo: Andrew Boyers/Reuters

UK wage growth failed to keep up with the cost of living crunch between December and February as real pay fell by 1%.

Regular weekly wages, excluding bonuses, actually increased by 4% between December 2021 and February 2022, but when adjusted for inflation it dropped compared with the year before, according to the Office for National Statistics (ONS).

Prices rose by 5.5% in January and inflation reached 6.2% in February. The Bank of England is expecting inflation to reach 8% this year, which will only worsen the impact on Britons.

Darren Morgan, director of economic statistics at the ONS, said: "While strong bonuses continue to mitigate the effects of rising prices on people's total earnings, basic pay is now falling noticeably in real terms."

Read more: Cost of living: Brits more worried about personal finances than catching COVID

In February alone, real regular wages dropped 2.1% which was the biggest drop since August 2013, the ONS added.

Total pay, including bonuses, rose by 5.4% in the 12 months to February. That means total pay was 0.4% higher than a year ago.

Average total pay growth for the private sector was 6.2% but just 1.9% for those in the public sector.

The latest ONS labour market data also revealed another rise in the number of UK workers on payrolls, with 35,000 more people in payrolled employment in March than in February.

Myron Jobson, senior personal finance analyst at Interactive Investor, said: “While it is the best period in years for wage growth, many households will still feel like they’re not making any headway against higher prices for everything from gas and electricity to groceries.

“The harsh reality is inflation has erased gains in wages and then some, on average — which for many means that while their pay packet has gone up, they can buy less stuff with it.

“With the Bank of England predicting that inflation could hit double digits this year, workers could be trapped in a cycle of bumper wages only to see those gains nullified by rising prices.”

The ONS’ estimate of payrolled employees for March 2022 is now at a record 29.6 million.

Chancellor Rishi Sunak said: “Today's stats show the continued strength of our jobs market, with the number of employees on payrolls rising once again in March and unemployment falling further below pre-pandemic levels.”

Read more: UK retail sales fall as cost of living and Ukraine war hit consumer confidence

ONS data also showed unemployment fell yet again to 3.8% in February, down from 3.9%. That is the lowest rate since October to December 2019, just before COVID hit the economy, with the unemployment total down 86,000 to 1.296 million.

Mims Davies, minister for employment, said: “Behind these ONS figures we know this is a difficult time for many workers and families.

“We’re doing everything we can to help, with our Way to Work scheme which is supporting people coming through the doors of our Jobcentres to move into better paid, higher skilled work. As well as increasing the national living and minimum wage all backed up by over £22bn of targeted investment.”

Watch: Why are gas prices rising?

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