Pay alert as real wages continue to fall

Real wages are falling at the fastest rate since current records began in 2000, according to the TUC, with the latest Office for National Statistics [ONS] showing regular pay fell by 2.8% in the last quarter.

The ONS says growth in employees’ average total pay (including bonuses) was 6.2% and growth in regular pay (excluding bonuses) was 4.3% in March to May 2022. In real terms (adjusted for inflation), over the year, it says total pay fell by 0.9% and regular pay fell by 2.8%.

The figures also show that job vacancies continue to rise, athough the rate of growth in vacancies is still slowing down.

In terms of employment the number of full-time and part-time employees increased in the March to May period, compared to the previous quarter. The number of self-employed workers fell during the coronavirus pandemic and has remained low, although the number has increased during the latest three-month period, mainly as a result of part-time self employed work which was largely offset by a decrease in the number of full-time self-employment.

While unemployment fell by 0.1% to 3.8%, those unemployed for up to six months increased over the latest three-month period at the fastest rate since late 2020. The economic inactivity rate decreased by 0.4% to 21.1% in March to May 2022.  A report by the Recruitment and Employment Confederation estimates that not addressing labour shortages could cost the UK economy £30bn a year and could see GDP fall by 1.2 per cent by 2027.

Tony Wilson, Director at the Institute for Employment Studies, said the figures show that ‘talk of tax cuts and ‘re-doing Brexit won’t help firms with the biggest problem they’re facing, which is finding the workers to fill their jobs’.

He said surveys show that labour shortages are pushing pay growth of more than 5% in the private sector which is being passed onto consumers and that this is now a key driver of rising prices. Even so, due to inflation, real wages are falling.  The opposite is the case for the public sector where wages are rising by less than 2%.  Wilson commented: “It is markets, not militancy, pushing pay higher.”

Wilson called on the Government to prioritise support for older workers and those out of work for long-term ill health to get back to work.

Meanwhile, the Government has unveiled this year’s below-inflation pay deal for 2.5 million public sector workers.  More than 1m NHS staff, including nurses, midwives and paramedics, will get a pay rise of £1,400, equivalent to 4%. NHS cleaners and porters will get 9.3%, while dentists and consultant doctors will receive 4.5%. Police in England and Wales will get £1,900 more, equivalent to a 5% overall pay award. Pay for most teachers in England will rise by 5% from September, an increase from the initial offer of 3%, while newly qualified teachers will get 8.9%. Those in the armed forces will receive a base pay rise of 3.5%.

TUC General Secretary Frances O’Grady said: “Working families need financial security. But real wages are falling at the fastest rate since current records began.

“We can’t go on like this. UK workers are suffering the worst pay squeeze in modern history. The priority for the country must be to get wages rising across the economy – not tax cuts.

“That means decent pay rises for public servants, a higher minimum wage and stronger bargaining rights for working people and their unions.”

TUC analysis published earlier this month revealed that the UK is on course for the worst real wage squeeze in the G7.

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