Finance and insurance workers have enjoyed pay rises of up to 20% while the lowest earners have seen their wages flatline amid the worsening cost of living crisis, according to a new report.
A “tale of two labour markets” has emerged in recent months with the highest and lowest earners experiencing pay growth on separate ends of the scale, research by the Centre for Economic and Business Research (CEBR) found.
The highest earners saw their pay rise by 11% on average in March while the lowest-paid workers’ pay grew by just 0.9% in the same period.
City of London workers, where many of the UK’s highest earners are concentrated, have enjoyed pay rises far higher than 99% of the nation’s workforce, the report showed.
Year-on-year pay increases for finance and insurance workers peaked at 19.8% in February while professional, scientific and technical sector employees saw wage growth spike 12.7% in the same period.
The report said such significant wage increases could be explained by a well-performing sector and workers in these industries often being paid bonuses linked to performance.
Inflation reached 9.1% in May and the top 1% of earners saw their pay increase at the same rate, meaning their real pay growth was zero.
But the lowest 10% of earners saw pay growth hit just 1.3%, reflecting the diminishing spending power of lower-paid households whose wages are not keeping up with the rising cost of living.
Nina Skero, chief executive of the CEBR, said: “With inflation ranging from 5.5% to 9.4% over the first half of 2022, even the pay rises seen at the top end of the scale mean many workers’ real pay growth is close to zero, but of course the most worrisome is the picture which emerges for lower earners.
“They are seeing exceptionally low pay growth, making it entirely unsurprising that there are so many stories emerging of families making impossible choices, for instance between cutting down on food consumption or falling behind on mortgage payments.”
Around 16 million people cut back spending on food and essentials in April to late June, a report by the Office for National Statistics found on Friday.
While 51% of the population, which amounts to around 24 million people, used less gas and electricity during the same period as energy costs surged.
Variation in wage growth between different income groups is expected over time, but the least well-off workers are experiencing stagnating pay at a time of “extraordinary” price rises, the CEBR said.
The economic researchers added that additional support needs to be targeted at the poorest households to avoid worsening hardship.