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 (opens in new tab), 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?
- Ask for a pay rise. While reducing the amount you spend will help, securing a higher wage will also help you fight back against the eroding effects of inflation on your pay packet.
- Claim the tax relief you are entitled to. Make use of tax reliefs and benefit schemes that you may qualify for, such as the working-from-home tax relief, the workplace uniform tax refund and the tax-free childcare allowance.
- Mitigate the effects of inflation on your savings. High inflation is a disaster for your savings. It means in order to grow your savings in real terms, you need to find savings accounts that pay rates above the rate of inflation. These simply don’t exist right now. The best savings account on the market is First Direct Regular Saver which pays 7% on savings up to £3,600. (Note you need its current account). See our article on the best savings rates for more.
-
-
Selling second-hand: do I need to pay tax?
If you sell on sites like eBay and Facebook – do you need to pay tax on money earned?
-
Broadband scams warning: scam calls cash in on upcoming price hikes
As broadband prices are set to hike from April, so are broadband scam - we explain how to spot the scams
-
Selling second-hand: do I need to pay tax?
If you sell on sites like eBay and Facebook – do you need to pay tax on money earned?
-
Broadband scams warning: scam calls cash in on upcoming price hikes
As broadband prices are set to hike from April, so are broadband scam - we explain how to spot the scams
-
Revealed: Airline exchange rate rip-off hikes flight costs up to 11%
Some airlines add a hefty markup when flights are paid for in sterling rather than a different currency. We reveal which airlines use a poor exchange rate - and how to avoid getting stung
-
Nectar Big Points Bonanza: boost your Nectar points balance this week
Earn thousands of extra Nectar points by 4 February through Nectar Big Points Bonanza
-
TV licence scam warning: how to spot the latest fake emails
How TV Licence scam emails pressure you to part with your bank details
-
Food inflation hits record 16.7% - is it time to switch to a cheaper supermarket?
With food inflation at a record high, is it time to switch to a cheaper supermarket? Find out which comes out as the cheapest and how much you can save
-
Reforms to child maintenance to support domestic abuse victims
Mothers will be protected from having direct contact with abusive ex-partners when claiming child maintenance payments under new reforms
-
Thousands caught out by high-income child benefit tax charge
Ten years on from the introduction of the high income child benefit charge, we explain how it works, who needs to pay it, and how to avoid fines
