THE ‘REAL VALUE’ of pay is in freefall, collapsing by 3% between April and June, according to the latest report from the Office for National Statistics (ONS).
The gap between pay growth and inflation is the biggest since records began more than 20 years ago and the rise in prices has driven UK inflation to a 40-year high, with the latest figure due out today.
Darren Morgan, director of economic statistics at the ONS, said yesterday: ‘The “real value” of pay is continuing to fall. Excluding bonuses, it is still dropping faster than at any time since comparable records began in 2001.’
The data also highlighted a gap between public and private sector wage growth, with private sector wages up by 5.9% while those working in the public sector saw pay growth of 1.8% – which Morgan said is the ‘largest difference we have seen for 20 years’.
The CPI (consumer price index) rate of inflation currently stands at 9.4%, while the RPI (Retail Price Index), currently stands at 11.8%, but was predicted last week by the NIESR (National Institute of Economic and Social Research) to reach an ‘astronomical’ 17.7% later this year.
The Bank of England recently lifted interest rates by the largest amount in 27 years to 1.75% in a bid to ‘cool’ rising prices.
It also warned that the UK economy will ‘fall into recession’ towards the end of this year as prices for gas and electricity continue to rise.
Nye Cominetti, a senior economist at the Resolution Foundation, said Britain ‘is witnessing the biggest pay squeeze since the Queen’s Silver Jubilee in 1977.
‘The scale of this pay pain is even deeper than official figures suggest too, as pay growth estimates are still artificially boosted by the effects of the furlough scheme last year,’ she said.
It says something about the extremity of inflation that the average pay rise is still not enough to keep up with price rises.
Economists are predicting another interest rate rise in September, saying that it is likely to be more than a quarter of a percentage point.
Commenting on the record 3% fall in wages in real terms for UK workers, Unite general secretary Sharon Graham said: ‘As we have said many times, wages are not driving inflation. We will continue to do whatever is necessary to defend jobs, pay and conditions during this cost-of-living crisis.’
The GMB union said yesterday’s record-breaking real wage drop shows that big businesses like Amazon must ‘get real on pay’.
Gary Smith, GMB general secretary, said: ‘Today’s record drop in real wages shows big business needs to get real on pay. A 35p hourly rise from a company that made billions during the pandemic is a joke.’
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