British wages see their biggest drop in real terms in 20 years

British wages have seen their biggest drop in real terms in 20 years, new official figures show, as inflation continues to climb.

Average pay excluding bonuses fell by 3% on the year after taking inflation into account, according to Office for National Statistics data released on Tuesday. This was the biggest fall since records began in 2001. The ONS data, which covers April-June this year, found that pay including bonuses fell by 2.5%. 

Britain is in the grip of a cost-of-living crisis, as high inflation pushes up all household costs and puts families under huge strain. Inflation, primarily being driven by rising energy prices, is currently at a 40-year high of 9.4% and is forecast to keep climbing this year.

Women are disproportionately affected by the cost-of-living crisis, several surveys and pieces of research have shown. Women earn less than men on average and are more likely to have jobs that pay below the living wage. They are also more likely to manage daily household costs, such as groceries and children’s items, which often puts the stress of rising costs onto their shoulders.

Before taking inflation into account, the ONS data shows that pay excluding bonuses grew by the relatively high level of 4.7%. Pay including bonuses grew by 5.1%. But rising prices in effect wipe out these gains.

The Trades Union Congress, a federation of unions, said the new wage data showed that the government must act now to boost pay. “[Ministers] must do far more to get pay rising – starting with boosting the minimum wage this autumn and giving public sector workers a decent pay rise,” Frances O’Grady, TUC General Secretary, said in a statement. 

From healthcare to teaching to transport, workers have been calling for wage increases as inflation rises. Some employers in the private sector have paid out “cost-of-living bonuses” to help retain staff, as the UK also grapples with a labour shortage.

There were 1.27 million job vacancies in the UK in May-July, which was 32% higher than a year ago, according to separate ONS data released on Tuesday. The latest figures showed a slight decrease of 19,800 vacancies compared to the previous quarter, which could be because rising prices are spurring some people to re-enter the workforce. But it is too early to say if this is sustained trend.

There are several reasons for the labour shortage, with different factors affecting different sectors. One overall trend is that Britain has seen a steady rise in the numbers of people who are not in the workforce due to long-term health issues, which includes both physical and mental health.

There has also been an exodus of workers over-50, some of whom chose to retire early after the pandemic, and Brexit has made it harder for EU workers to come to the UK. Several surveys have also shown that rising numbers of workers are suffering from burnout.

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