Yahoo Finance UK pay rises at fastest rate in 20 years but fails to keep up with inflation
Wages continued to climb in the UK but failed to keep pace with inflation despite the largest rise outside of the COVID pandemic.
Pay, excluding bonuses, increased at an annual pace of 6.7% between October and December 2022, the Office for National Statistics (ONS) said. However, when adjusted for inflation, regular pay fell by 2.5%.
Workers in the private sector saw a boost of 7.3% to their pay, while the strike-engulfed public sector saw a more modest increase of 4.2%.
After taking inflation into account, average pay including bonuses fell by 3.1% in the year to October to December 2022, or 2.5% excluding bonuses.
➡️ https://t.co/8Uyn5mzWqH pic.twitter.com/QyycBzro7F— Office for National Statistics (ONS) (@ONS) February 14, 2023
Stephen Evans, chief executive at Learning and Work Institute, said UK workers have now suffered 15 miserable years of real wages.
“Real earnings are falling at their fastest rates since the financial crisis due to high inflation, leaving them no higher now than before the pandemic," he said.
"A miserable 15 years for real wage growth means people would be earning £11,000 a year more on average if pre-financial crisis trends had continued. So as well as bringing inflation under control, we urgently need a growth plan for our economy," he added.
Still, the increases might sound the alarm at the Bank of England, as it tries to bring UK inflation down from double-digit levels towards its 2% target. Inflation — the rate at which prices are rising — is running at 10.5%.
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The wave of UK strike action at the end of last year was the most disruptive in over a decade.
Some 843,000 working days were lost because of labour disputes in December 2022 — the highest for any month since November 2011.
Thousands of workers went on strike in recent months over pay and working conditions, with postal workers, rail workers and nurses all taking industrial action.
Darren Morgan, director of economic statistics at the ONS, said: “The last quarter of 2022 saw fewer people remaining outside the labour market altogether, with some moving straight back into a job and others starting to seek work again.
“This meant that although employment rose again, unemployment edged up also.
“Although there is still a large gap between earnings growth in the public and private sectors, this narrowed slightly in the latest period.
“Overall pay, though, continues to be outstripped by rising prices.”
He added: “Though still at historically very high levels, job vacancies have dropped again, with a particularly sharp fall from the smallest employers.
“The number of working days lost to strikes rose again sharply in December.
“Transport and communications remained the most heavily affected area, but this month there was also a large contribution from the health sector.”
Unemployment edged up slightly to 3.7% while vacancies fell by 76,000 in November to January, marking the seventh consecutive quarterly fall.
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Chancellor Jeremy Hunt said: “In tough times unemployment remaining close to record lows is an encouraging sign of resilience in our labour market.
“The best thing we can do to make people’s wages go further is stick to our plan to halve inflation this year.”
The UK employment rate was estimated at 75.6%, 0.2 percentage points higher than the previous three-month period, the Office for National Statistics (ONS) said. The increase in employment over the latest three-month period was driven by part-time workers, it said.
Yael Selfin, chief economist at KPMG UK, said: "Demand for staff is losing momentum, with employers pivoting away from hiring permanent staff to temporary placements as they become more cautious over the economic outlook.
"Following another fall in January, vacancies are now 166,000 below their peak in May 2022 — a drop of 13%, while the redundancy rate is back to pre-pandemic levels."
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