Wages grow at fastest rate in 20 years, but fail to keep up with inflation

Wages rose 6.4% in the three months to November from the same period a year earlier, the fastest growth since 2001, but real wages dropped by 3.8% as pay failed to keep up with the increasing cost of living. Inflation currently stands at 10.7%.

Private sector wages grew 7.2% annually in the three months to November, meanwhile the public sector only saw a 3.3% increase.

It comes as thousands of workers across a number of sectors continue to press on with strike action over pay, conditions and contracts. Among them are rail workers, nurses, teachers, dockers and postal staff, to name a few.

Vacancies in October to December 2022 was 1,161,000, a decrease of 75,000 from July to September 2022. Although levels are still at historically high levels.

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The UK employment rate was estimated at 75.6% in September to November 2022, largely unchanged compared with the previous three-month period and 1.0 percentage points lower than before the pandemic (December 2019 to February 2020).

The number of employees and part-time self-employed workers increased over the latest three-month period, while full-time self-employed workers decreased.

The unemployment rate for September to November 2022 increased by 0.2 percentage points on the quarter to 3.7%. In the latest three-month period, the number of people unemployed for up to six months increased, driven by those aged 16 to 24 years.

The economic inactivity rate decreased by 0.1 percentage points on the quarter to 21.5% in September to November 2022. 

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The redundancy rate has increased to 3.4 per thousand employees in September to November 2022 but remains low.

“The real value of people’s pay continues to fall, with prices still rising faster than earnings,” said Darren Morgan, ONS director of economic statistics.

“This remains amongst the fastest drops in regular earnings since records began.”

‘Despite high demand for workers, real pay continues to shrink, says the CIPD 

In total, 467,000 working days lost were lost due to strikes in November 2022 - the highest number in more than 10 years.

The figures suggest that the labour market “may be cooling down, but it’s still hot to the touch”.

Responding to today’s ONS labour market figures, Jonathan Boys, labour market economist for the CIPD, the professional body for HR and people development, comments: “While there are fewer vacancies than last quarter, they still remain high by historical standards. Demand for staff is high, but there is a shortage of available people as unemployment remains low and the workforce is smaller than it was pre-pandemic. For those still in work however, their bargaining power may be increasing.

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“Annual pay growth of 6.4% would usually be reported as phenomenal, but with prices rising by 10.7%, this still represents a real-terms pay cut, plunging the cost-of-living crisis to new depths. A combination of worker power and falling real wages is driving the current spate of industrial action, as we saw 467,000 days lost to strikes in November.                  

“Labour supply shortages are worrying policymakers and businesses. Many people have dropped out of work entirely and employers need to do more to entice them back. This means creating jobs that work for people. A focus on job quality, including flexible working in all its guises, will facilitate the inclusion of people who may have left employment because they could not make it work for them.” 

Sheila Attwood, XpertHR senior content manager, data and HR insights, predicts that that the median pay award is likely to increase.

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“The ONS data shows a continuing strong labour market and against this our data also suggests that the bargaining pace may be quickening, as we approach April,” she said.

“Money remains front of mind for all, with the UK just holding off a recession for now, and the cost-of-living crisis continuing. It’ll be a balancing act for employers between pay affordability and pay expectations.

“Continued industrial action and the labour market only beginning its slow down pushes the emphasis on employers to ensure they pursue these conversations carefully as well as consider other ways to support employees during this time while still remaining in the black.”