UK wages fall sharply despite record low unemployment rate
UK wages continued to fall further behind the rate of inflation in March, new data has shown, adding more pressure to the sharp cost of living squeeze on households.
UK employment came in at 75.7%, while unemployment was 3.7%, its lowest rate since 1974, for January to March 2022.
According to the latest data from the Office for National Statistics (ONS) published on Tuesday, average earnings excluding bonuses fell by 1.9% compared to a year earlier, the biggest decline since 2013.
Although wages excluding bonuses jumped 4.2% in the first quarter, double the 2.1% average in the decade before the pandemic, it was being offset by runaway inflation and a surging cost of living.
Basic pay shrank in real terms, as CPI inflation hit 7% in the year March, and may have soared over 9% in April. It is set to hit as high as 10% by the end of the year, with the Bank of England (BoE) warning this could tip the economy into recession.
Average total pay growth for the private sector was 8.2%, but just 1.6% for the public sector.
The finance and business services sector showed the largest growth rate at 10.7%, partly thanks to strong bonus payments.
Read more: Skills shortfall and inflation drive up UK wages to record highs
Although total employment was up on the quarter, it still remains below its pre-pandemic level.
Chancellor Rishi Sunak said: “The unprecedented support we provided through our Plan for Jobs has led to the jobs market remaining robust despite global challenges, with the unemployment rate near record-lows and the number of payrolled employees at a record high.
“I understand that these are anxious times for people, but it’s reassuring that fewer people are out of work than was previously feared, and we are helping them to keep more of their hard-earned money through tax cuts, changes to Universal Credit and support with household bills worth £22bn this financial year.”
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Since the start of the COVID pandemic around half a million more people have completely disengaged from the labour market, the ONS revealed.
However, the number of employees on payroll continued to grow in April, and is now 530,000 above its pre-pandemic level. Employers added 121,000 people last month, more than double the initial forecast.
Vacancies rose to almost 1.3 million during the period, hitting another record high as employers struggle to find workers.
“While the economy was still growing in the first three months of 2022, there continued to be a mixed picture for the labour market,” Darren Morgan, director of economic statistics at the ONS, said.
Read more: UK basic pay falls behind inflation at fastest rate in eight years
Total actual weekly hours worked reached 1.042 billion in the quarter, 14.8 million up on the previous three months. But this was still 10.7 million below pre-COVID levels.
Tony Danker, CBI director-general, said the government now must act on two fronts right away.
“The first is to help people facing real hardship now; it’s the moral underpinning of our economy and society. Recent surveys suggest more than one in 10 households have skipped – or had smaller meals – in the past month because of a lack of affordability, while around half a million more households are expected to face choices between heating and eating. Putting pounds in the pockets of people struggling the most should not be delayed.
“Secondly; start stimulating business investment now – we will need to ensure that there is economic growth in the pipeline to avoid any downturn in our economy that could worsen or prolong the cost-of-living crisis.”
PwC said their modelling suggest even further pain for those on low incomes. “The real wage squeeze continued to tighten as the highest earners were the only group to see their pay packets grow by more than inflation, while the lowest earners saw the sharpest fall in their real wages. As a result, our modelling suggests that lower-income households could see their incomes fall by as much as £1,300 this year," said Jake Finney, economist at PwC.
