Yahoo Finance UK workers see record drop in pay amid rising bills
Regular pay of UK workers, excluding bonuses, fell an average of 3% in the three months to June when inflation is taken into account, according to the Office for National Statistics (ONS).
Household budgets have been hit by soaring energy bills as well as higher food and fuel costs in recent months.
Figures showed average total pay, including bonuses, grew by 5.1% between April and June while regular pay excluding bonuses grew by 4.7%.
However, when adjusted for inflation, total pay fell 2.5% and regular pay fell by 3%, the fastest decline since comparable records began in 2001. It is also the ninth consecutive month-on-month drop in real-term pay, the figures show.
After taking inflation into account, average pay including bonuses fell by 2.5% in the year to April to June 2022.
Excluding bonuses, it fell by 3.0% - the biggest fall since records began in 2001 https://t.co/OBmNjIDhoa pic.twitter.com/zjFkFr7lYX— Office for National Statistics (ONS) (@ONS) August 16, 2022
The rise in prices has fuelled the UK inflation rate to 9.4%, with warnings the economy will fall into recession.
The number of UK workers on payrolls rose by 73,000 between June and July to 29.7 million, the ONS also revealed.
ONS director of economic statistics Darren Morgan said: “The number of people in work grew in the second quarter of 2022, whilst the headline rates of unemployment and of people neither working nor looking for a job were little changed. Meanwhile, the total number of hours worked each week appears to have stabilised very slightly below pre-pandemic levels.
“Redundancies are still at very low levels. However, although the number of job vacancies remains historically very high, it fell for the first time since the summer of 2020.
“The real value of pay continues to fall. Excluding bonuses, it is still dropping faster than at any time since comparable records began in 2001.”
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The unemployment rate in the quarter rose by 0.1 percentage points to 3.8%, still close to the lowest levels since the 1970s.
But in a sign that hiring demand is starting to slow, the number of job vacancies fell by 19,800 to 1.274 million, the first quarterly decline since the June to August period in 2020.
Employment rose 73,000 in July to a record 29.7 million people, while the employment rate for people aged 16 to 64 dipped by 0.1 percentage points to 75.5% in the quarter to June.
Chancellor Nadhim Zahawi said: “Today’s stats demonstrate that the jobs market is in a strong position, with unemployment lower than at almost any point in the past 40 years — good news in what I know are difficult times for people.
“This highlights the resilience of the UK economy and the fantastic businesses who are creating new jobs across the country.
“Although there are no easy solutions to the cost of living pressures people are facing, we are providing help where we can. We are delivering a £37bn package of help for households through cash grants and tax cuts so people can keep more of what they earn.
“And whilst we cannot completely shield everyone from these global economic shocks, we are targeting this support on millions of the most vulnerable people in our society: those on the lowest incomes, pensioners and disabled people.”
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Paul Craig, portfolio manager at Quilter Investors, said: “Employees did see their pay, excluding bonuses, rise by 4.7% from April to June, but this will be little comfort given where inflation is. Even with a rise this high, they have experienced real terms cut of 3%.
"While Andrew Bailey won’t want to see pay rising too quickly, we are headed for a difficult winter where some parts of the population will be struggling with energy bills and the cost of food.
"If inflation continues on its trajectory to the forecasted 13% this is only going to exacerbate the situation further. The pay demands we have seen in the public sector of late are only going to get louder."
Adrian Lowery, financial analyst at UK wealth manager Evelyn Partners, said: “Soaring inflation is really starting to eat into spending power, with real earnings falling by a record 3.0% despite a hefty average nominal pay increase of 4.7%.
"The difficulty for workers now in both public and private sectors is that increased pay demands to cope with inflation must contend with the depressed economic outlook, and employers’ uncertainty over their own earnings.
“The robust UK labour market seems to be at a plateau, with employers squaring their current need to attract and retain employees with the clouds of economic weakening on the horizon. A leading indicator of caution could be the first fall in the number of job vacancies since June to August 2020: there were 1.274 million in May to July 2022, a decrease of 19,800 from the previous quarter."
