Yahoo Finance UK real wages fall to 20-year low as job vacancies rise to 1.3 million
Real wages in the UK continue to fall behind inflation at the fastest rate in a decade amid a rise in unemployment.
Regular pay excluding bonuses plunged by 3.4% in April after inflation, marking the biggest decline since records began in 2001, according to the Office for National Statistics (ONS).
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Over the three months to April, they fell 2.2%, which is the biggest quarterly drop in a decade.
For public sector workers, real pay is falling by nearly 6% a year, the ONS figures showed.
IES director Tony Wilson said: “This is really grim news on pay and is only likely to get worse. Despite the tightest labour market on record, nominal pay is broadly flat meaning that rocketing inflation is leading to the largest cuts in real pay in at least two decades.
"The picture is particularly bad for public sector workers, with real pay falling by nearly 6% year on year."
It comes as inflation has jumped to a 40-year high of 9% due to soaring energy and fuel bills amid the impact of the Ukraine war, and as economies emerge from the pandemic.
The figures highlight the cost of living squeeze for British workers as pay increases are eaten up by the fastest inflation in decades.
The unemployment rate rose to 3.8% in the three months to April, as more people look for work. That’s up from 3.7% in the quarter to March, which was the lowest in 50 years.
The ONS figures also highlighted the difficulties faced by businesses in hiring staff.
The number of people on company payrolls increased to a fresh record high, up 90,000 in May to 29.6 million.
The number of job vacancies in March to May 2022 rose to a new record of 1.3 million. But there were 41,000 more people without work but looking for a job, the first increase since the three months to December.
After taking inflation into account, average pay including bonuses rose 0.4% in the year to February to April 2022, thanks to strong bonuses.
However, excluding bonuses, pay fell by 2.2% in real terms https://t.co/iB6VqmLG3N pic.twitter.com/LJL6vVrPQF— Office for National Statistics (ONS) (@ONS) June 14, 2022
Sam Beckett, head of economic statistics at the ONS, says the latest figures continue to show a mixed picture for the labour market.
"While the number of people in employment is up again in the three months to April, the figure remains below pre-pandemic levels.
"Moreover, although the number of people neither in work nor looking for a job has fallen slightly in the latest period, that remains well up on where it was before COVID-19 struck.
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"At the same time, unemployment is close to a 50-year low point and there was a record low number of redundancies."
Chancellor Rishi Sunak insisted the statistics show UK's jobs market “remains robust with redundancies at an all-time low”.
However, Tony Wilson, director of the Institute for Employment Studies, said this is “really grim news” on pay and is only likely to get worse.
"Despite the tightest labour market on record, nominal pay is broadly flat meaning that rocketing inflation is leading to the largest cuts in real pay in at least two decades. The picture is particularly bad for public sector workers, with real pay falling by nearly 6% year on year.
"At the same time while employment is starting to pick up, there’s still a million people missing from the labour force compared to pre-pandemic trends – particularly older people, those with health conditions and overseas workers.
"The large rises in long-term ill health are particularly concerning, with a quarter of a million more people outside the labour force than before the pandemic."
The squeeze is piling pressure on prime minister Boris Johnson and creating a major challenge for Bank of England Governor Andrew Bailey as policy makers try to curb inflation without pushing the economy into recession.
But according to Torsten Bell of the Resolution Foundation, the fall in regular real pay showed that fears of a wage-price spiral are misplaced.
If you're looking for a turning point in today's jobs data this is it: first rise in short term unemployment since 2020, and overall unemployment actually rose in April. Too early to tell for sure, but some in @bankofengland will welcome signs of a cooling labour market pic.twitter.com/nnheyDk2Lz
— Torsten Bell (@TorstenBell) June 14, 2022
Neil Carberry, chief executive of the Recruitment & Employment Confederation, says the latest numbers show "what a great time it is to be looking for work".
The ONS said those classed as economically inactive fell by 39,000 in the quarter, but remained high at 8.8 million, due mostly to older workers choosing to retire early throughout the pandemic, which has led to a shrinking labour market.
“Real wages are falling off a cliff as the cost of living soars,” said Frances O’Grady, general secretary of the Trades Union Congress. “Millions of workers are being forced to choose between paying their bills or feeding their families. That isn’t right.”
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The figures also show 2.949m jobs in retail, down 83,000 year-on-year. Helen Dickinson, chief executive of the British Retail Consortium, said: “Retail jobs numbers fell this quarter as the tightest labour market in decades intensified competition for talent. This is doubly true as the hospitality and tourism industries recover from the pandemic.
"Nonetheless, the expansion of digital retail has created many new well-paid and exciting jobs in the industry, which will continue to grow in the future. However, only by reforming the Apprenticeship Levy can retailers deliver the future skills needed of the industry and train the next generation of skilled retail professionals.”
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