Wages rise at fastest pace for over 20 years - but workers still worse off

Workers’ wages are failing to keep up with the rising cost of living. We explain howto boost your income or bag a pay rise

Piggybank next to stacks of coins and wooden blocks reading "2023"
(Image credit: Getty images)

Wages have risen at the fastest rate in more than 20 years but are still failing to keep up with inflation - leaving workers with a pay cut in real terms.

Average pay, including and excluding bonuses, rose by 6.4% between September and November compared with the same period in 2021, according to the Office for National Statistics (ONS).

It is the fastest growth since 2001, but when adjusted for inflation, wages fell in real terms by 2.6%.

It means millions of workers face a pay cut as inflation eats into their earnings.

Living costs are rising at the fastest rate in almost 40 years, with energy, food and travel prices experiencing record highs. Inflation, the rate at which prices rise, is currently at 10.7%.

Darren Morgan, director of economic statistics at the ONS, said the "real value" of people's pay was continuing to fall, with regular earnings dropping at the fastest rate since records began once inflation is taken into account.

Prime Minister Rishi Sunak has promised to halve inflation this year while Chancellor Jeremy Hunt said the UK labour market remained "resilient".

"The single best way to help people's wages go further is to stick to our plan to halve inflation this year," Hunt said. "We must not do anything that risks permanently embedding high prices into our economy, which will only prolong the pain for everyone."

How to deal with high inflation - ask for a pay rise

Alice Haine, personal finance analyst at investment platform Bestinvest, says:  “With the pay squeeze intensifying and typical households likely to be £2,100 worse off by April 2024, according to the Resolution Foundation, the industrial action rapidly becoming a regular feature of post-pandemic life, as workers down tools in a bid to secure pay rises more closely aligned to the inflation rate, is likely to persist. 

It makes sense to cut your outgoings to help your money go further. You can do this by cutting the cost of your gas and electricity usage, switching broadband and being clever with your food shop.

What else?

Katie Binns

Katie is staff writer at The Money Edit. She was the former staff writer at The Times and The Sunday Times. Her experience includes writing about personal finance, culture, travel and interviews celebrities.  Her investigative work on financial abuse resulted in a number of mortgage prisoners being set free - and a nomination for the Best Personal Finance Story of the Year in the Headlinemoney awards 2021.