Millions of workers face a ‘real’ pay cut as official wage growth fails to keep up with soaring inflation, according to the latest figures from Office for National Statistics (opens in new tab) (ONS).
Wages, excluding bonuses, rose by 4.2% between January and March, but failed to keep up with inflation at 7%.
Inflation is eroding workers’ earning power while the cost of living crisis means salaries are being stretched, as households deal with rising bills, soaring food and fuel prices and more. The Bank of England has warned inflation could hit 10% later in the year, which would only further squeeze workers' wages.
The figures show it’s not the same experience for all workers as those in construction and financial services benefited from bonuses. This saw their total pay, including these bonuses, rise by 7% between January and March, keeping pace with inflation.
Meanwhile, job vacancies outstripped the number of unemployed people for the first time since records began. The unemployment rate fell to 3.7% in the first three months of the year - its lowest level in nearly 50 years - suggesting the cost of living crisis may be forcing the unemployed to find work at record levels. At the same time, job vacancies hit a new high of 1.295m between February and April.
Total job-to-job moves rose to a record high of 994,000 during the January to March, driven by resignations rather than dismissals. This suggests that people in jobs were seeking out better pay.
Myron Jobson, senior personal finance analyst, interactive investor, says: “The UK has a glut of jobs – it is the labour supply that is an issue. Jobseekers are holding all the cards as employers desperately seek to attract and retain talent to take their business to the next level in what has been a tumultuous period for recruitment.
It’s a mixed experience for workers. “The struggle to attract and retain talent has led to employers offering golden hellos and dishing out strong bonuses, which have driven wage growth to inflation-busting levels,” says Jobson.
“However, not every worker has been so fortunate,” he adds. “Many have not seen their incomes keep up with inflation. Pay packets are not stretching wide enough to meet the escalating cost of seemingly everything from food, energy and petrol.”
Danni Hewson, a financial analyst at AJ Bell agrees. “Let’s not forget that for some people, increased costs in things like fuel and childcare make work unaffordable. And for those working two or even three jobs and still struggling to get by - they want more tangible help, an immediate solution to their own personal crises.”
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