Yahoo Finance UK wages fall by 2.7% as unemployment rises
The UK recorded its second largest fall in real wage growth since records began in 2001 in October amid a rise in unemployment.
The Office for National Statistics (ONS) reported that regular pay in real terms grew by 6.1% in the three months to October. But taking inflation into account, wages fell by 2.7%.
The statistical body said it “remains among the largest falls in growth since comparable records began in 2001”.
After taking inflation into account, average pay fell by 2.7% in the year to August to October 2022, both including and excluding bonuses.
➡️ https://t.co/Mm5HeBtEv7 pic.twitter.com/MVFCs32mbn— Office for National Statistics (ONS) (@ONS) December 13, 2022
The rate of inflation hit 11.1% – a 41-year high – in October as it reflected the latest increases to energy bills.
The ONS data also revealed a widening gap between private sector and public sector pay, growing by 6.9% and 2.7% respectively – among the biggest differences seen on record.
With public sector workers demanding pay increases closer to the current rate of inflation, the Government insists it will stick to the recommendations of independent pay review bodies.
It comes as a month of rail disruption begins on Tuesday when workers walk out for their first of a wave of 48-hour strikes, as nurses also prepare to take unprecedented industrial action.
The ONS reported that 417,000 days were lost to strikes in October – the highest number of days lost to strikes in over 10 years.
Read more: UK economy returned to growth in October with 0.5% rise in GDP
Chancellor Jeremy Hunt said: “To get the British economy back on track, we have a plan which will help to more than halve inflation next year – but that requires some difficult decisions now.
“Any action that risks embedding high prices into our economy will only prolong the pain for everyone, and stunt any prospect of long-term economic growth.”
The ONS data also showed the rate of UK unemployment rose to 3.7% in the three months to October, up from 3.6% in the previous three months.
Sam Beckett, ONS head of economic statistics, said: “This quarter the proportion of people neither working nor looking for a job fell, driven by a drop in the number of working-age people regarding themselves as retired.
“This tallies with other data which suggest more people in their 50s are thinking of going back to work, at a time when the cost of living is rising rapidly.
“With more people re-engaging with the labour market, there were more in employment and also more who were actively looking for a job.”
“Though job vacancies are still at a very high level, they continue to fall and are now lower than they were a year ago.”
Vacancies dropped by 65,000 in the three months to November to 1.9 million – the fifth quarterly fall in a row and the first annual fall since the beginning of last year.
Barret Kupelian, senior economist at PwC UK, said: “The more noteworthy news from today’s release of labour market data for the UK was that the labour market is showing some signs of cooling.
"Despite marginal growth in employment, the number of vacancies in the UK economy continued to decrease for a fifth consecutive month since summer this year. There are now as many vacancies in the UK economy as the number of unemployed. As the economy stagnates in the coming months, we expect the labour market to cool further with vacancies dropping further."
The pay as you earn (PAYE) data revealed that the number of workers on UK payrolls rose by 107,000 between October and November to 29.9 million.
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TUC general secretary Frances O’Grady has said the government should negotiate “fair pay rises” with unions as the UK braces for economic recession.
"2022 has been the worst year for real wage growth in nearly half a century. We are now on the brink of a damaging recession with the threat of one million lost jobs," she said.
"Ministers must act now to put money in people’s pockets – starting with boosting the minimum wage and giving our public sector workers a pay rise to match the cost of living.
"And the prime minister should stop attacking working people trying to defend their pay, and sit down to negotiate fair pay rises with unions," she added.
The figures also signalled that more people are choosing to return to work, with the inactivity rate falling to 21.5% as those in their 50s opt to go back to work as the cost of living bites.
Alice Haine, Personal Finance Analyst at Bestinvest, said: “This data reveals yet another hit to the purchasing power of Britain’s workers who are also contending with soaring prices on the goods and services they consume as well as higher borrowing costs and the biggest tax burden since the Second World War following Chancellor Jeremy Hunt’s raft of tax changes in the Autumn statement.
Read more: Real wages shrank by nearly £80 a month this year, says TUC
"It seems there is little to celebrate for workers in the run-up to Christmas, with the destructive force of inflation on real pay even more severe for public sector workers causing industrial action across the country as NHS workers, train and bus drivers, border force agency staff, driving instructors, postal workers and teachers head to the picket line.
“The personal finance misery may only worsen as the nation braces itself for yet another rate hike later this week with the Bank of England expected to increase interest rates by 0.5 percentage points to 3.5% – the highest level since 2008. The country is also facing a long recession with GDP contracting 0.3% in the three months to October making the outlook appear even more grim."
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