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Public sector pay grows at fastest rate in 20 years but still lags behind inflation

pay People walk on London Bridge, the day after a national rail strike, during six days of travel disruption, in London, Britain, June 22, 2022. REUTERS/Peter Cziborra
Largest public sector pay growth since 2003 while jobless rate ticks up. Photo: Peter Cziborra/Reuters (Peter Cziborra / reuters)

Public sector pay is at its highest levels since 2003 but UK workers continue to be hit by falling real wages, with earnings lagging behind rising prices.

Average earnings in the public sector grew by 5.6% in the first three months of the year, according to figures from the Office for National Statistics (ONS).

This is the highest level since August to October 2003 as more and more staff demanded pay rises to keep up with inflation, which stands at 10.1%.

Private sector pay grew by 7% over the period with overall regular pay excluding bonuses growing by 6.7%.

However, after taking inflation into account, average pay including bonuses fell by 3% in the year to January to March, or 2% excluding bonuses.

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The Bank of England fears rising wages will fuel inflation as pay keeps up with surging prices.

The ONS data also showed the unemployment rate also rose to 3.9% in the January to March period.

The increase in unemployment was largely driven by people unemployed for over 12 months, the ONS said.

The figures show companies are shedding workers as the jobs market cools, and more people look for work.

The more timely PAYE figures showed the first fall in workers on payrolls since February 2021, down 136,000 to 29.8 million.

Read more: Inflation: Supermarket meat, yoghurt and vegetable prices doubled in a year

The number of vacancies fell by 55,000 quarter-on-quarter to 1.08 million in the three months to April, marking the tenth fall in a row. This is the first fall in total payrolled employees since February 2021.

The number of people who are out of work because they are long-term sick has surged by 235,000 year-on-year to hit a new record high.

There were 556,000 working days lost because of labour disputes in March, the report said.

That was up from 332,000 in February and took the total for the year to date to 1.1 million.

Darren Morgan, director of economic statistics at the ONS, said: "Employment and unemployment both rose again in the first three months of 2023, driven in particular by men.

"This means the number of those neither working nor looking for work continues to fall, although the number of people not working due to long-term sickness rose again, to a new record.

"Despite continued growth in pay, people's average earnings are still being outstripped by rising prices."

But the figures also showed a rise in the employment rate to 75.9% and a fall in inactivity as more men in particular starting looking for work.

Chancellor Jeremy Hunt said: “It's encouraging that the unemployment rate remains historically low but difficulty in finding staff and rising prices are a worry for many families and businesses.

“That's why we must stick to our plan to halve inflation and help families with the cost of living, while delivering our childcare reforms and supporting older people and disabled people who want to work.”

Read more: UK households paying £1.1bn more for energy bills after Brexit

Unions are alarmed that real wages are continuing to fall, with inflation outpacing earnings growth.

TUC general secretary Paul Nowak is urging government to give public sector workers a fair pay rise to end the industrial action hitting the economy.

He said: “Workers have lost more than £1,000 from their pay over the last year. But there’s still no end in sight for the longest wages slump in modern history.

“Real wages remain below where they were in 2008, and the already 15-year pay squeeze is set to last another three years, until 2026.

“It is little surprise that workers are having to take strike action to defend their living standards. They have been pushed to breaking point.

“Ministers must focus on resolving all of the current pay disputes.

“And they must act now to put money in people’s pockets — starting with giving our public sector workers a real pay rise, boosting the minimum wage to £15 per hour, and ending their attack on the right to strike for better pay and conditions in the Strikes Bill.”

Watch: Largest public sector wage growth since 2003 while jobless rate ticks up

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