Pay rises for some, but a cut for many

While some people are getting above inflation pay rises, many aren’t so how can we help those who are really struggling?

woman with empty purses


The latest ONS figures show that taking a general figure really doesn’t tell you a lot about what is happening in the economy. Take pay. It’s hard to keep track of what is happening. Yesterday’s ONS figures are already out of date since they are based on an inflation rate of 7% when today the figure has risen to 9%. If you exclude bonuses, which only relates to some jobs, the ONS said the average growth in regular pay stood at 4.2%. If we adjust for 7% inflation regular pay fell by 1.2% on average.

Moreover, some of last year’s figures are still influenced by furlough rates when people were often paid just 80% of their wages so returning to 100% can affect the pay rise figures. However, the ONS says this is less of an issue with the most recent statistics.

Another set of figures released yesterday shows the difference in pay growth in different sectors, with sectors such as financial services and construction doing much better than others, including health and education. Education is at the lowest end of the pay rises at just 2.4%, meaning a real terms cut. Typically women tend to dominate in the sectors which have seen the lowest pay rises. Other studies have shown regional variations in pay increases, often linked to the type of industry prevalent in a particular area.

So what we are seeing is a very divided picture with some people getting above inflation increases and others getting significantly below inflation rises.

The answer can’t be to tell people to move jobs or take on more jobs. Those who can have already done that. Many are working several jobs and have been doing so for years. Many people were already significantly in debt way before Covid and the energy crisis. Moreover, encouraging a mass stampede from education, health or social care is not exactly a good policy at a time when the public sector is already overstretched and has never been more needed.

What is desperately needed, and has been needed for some considerable time, is a focus on boosting the incomes of the lowest paid, for instance, through an uplift in benefits which are rising way below the inflation rate. It comes to something when the CBI Director-General Tony Danker is calling for immediate assistance for ‘people facing real hardship’. Stating that people skipping meals is unacceptable, Danker said yesterday: “Putting pounds in the pockets of people struggling the most should not be delayed.” If not, will we see many employers providing emergency food for their employees? Already we are hearing of families sheltering in McDonald’s to save money on electricity and heating bills.

As we wait and wait for the government to react, because this is surely the job of government, what can employers do to help their employees through this emergency? For those who can, paying the Real Living Wage is vital because it particularly helps the lowest paid who are facing the most hardship, but many businesses are also struggling with cost of living rises themselves and have little leeway for pay rises.

There are other benefits that can be enhanced for working parents such as enhancing parental leave so that it is above a statutory minimum that has not risen in line with inflation or providing loans for childcare deposits to help people get into or stay in work after having children and offering support to cover holiday childcare costs. If there is no money for that, employers could offer employees the ability to buy more holidays or give them more unpaid leave. The latter might not help much if an employee cannot afford to take unpaid time off, but taking a few unpaid days off might work out cheaper than paying for a babysitter or a holiday playscheme, particularly if the employee has more than one child.

Another way of helping employees to cut back on childcare bills is by giving them greater flexibility or support at key times like the summer holidays, for instance, offering annualised hours where they work longer days in peak periods and shorter or fewer days in the summer holidays. Other possible ways of helping include signposting to emergency support. In the longer term, ensuring there are career pathways for every job so everyone has the ability to progress, no matter what patterns they work, is also important.

Remote working can help with reducing travel to work costs – unless, of course, employers cut employees’ wages to reflect this and we know some people are seeking it for those reasons. This might be subject to change, however. While remote working can reduce travel costs, when winter comes it may mean additional heating costs.

The most important thing is for employers to acknowledge the scale of the problem and seek channels to ask their employees for suggestions of what might best help, given everyone’s circumstances differ.

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