ONS latest | Wage rises not keeping pace with the cost of living

Wage rises not keeping pace with the cost of living

New data shows that wages are not rising in line with inflation – and in fact, in real terms, average weekly wages fell last year. The BBC reports that regular pay, excluding bonuses and adjusted for inflation, fell one per cent in November compared to the same month in the previous year.

Although the latest data from the Office of National Statistics (ONS) shows that wages rose in the year to November 2021, they did not keep pace with the increase in the cost of living.

"Salaries are growing reasonably strongly, but some people are saying they are not feeling much better due to rising prices," the ONS told the BBC.

Although there’s been much reporting on how the “Great Resignation” has seen employers upping their salaries in a bid to attract employees – to as much as £150,000 for recent graduates in the legal sector, for example – it seems that inflation is currently offsetting much of the impact of this.

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Inflation is currently at its highest level in 30 years, at 5.4%, and is expected to rise to 6% by April.

To add to the pressure on household pay packets, energy prices are also rising rapidly – the cap on energy prices will rise by 51% on 1st April, adding an extra £600 per year onto the average energy bill, according to money expert Martin Lewis, writing for moneysavingexpert.com.

However, some experts believe that panic about the cost of living outstripping wage rises may be short-lived, as demand for workers pushes wages up. UK job vacancies are currently at a record high of 1.24 million, the BBC reports, with shortages of skilled workers in almost every sector. The ONS data shows that unemployment fell by 0.4% during the last quarter to 4.1%, and redundancies are at their lowest level since records began.

Paul Farrer, Chairman of international recruitment group Aspire, is among those who thinks the outlook is optimistic. Although he says the UK is not “out of the woods” in terms of the way the economy is growing, he says that that “in our experience” it isn’t the case that wages are dropping.

“From creative sectors to sales, events and technology, we are witnessing historic wage growth as businesses offer higher salaries to win the war for talent,” he says.

“As the market returns to pre-pandemic levels, job vacancy growth will naturally slow, which is ultimately a good thing for employers. That said, the high rate of staff turnover – as candidates gain confidence from the economic recovery – will likely keep vacancy numbers high for some time. With this in mind, employers would be wise to consider not only how they recruit candidates, but also ways they can retain the skills they depend on.”

Chancellor Rishi Sunak also seems cautiously optimistic. He said that that wage growth was "relatively healthy by historical standards but of course we are seeing challenges with inflation", the BBC reports.

He added: “We are taking action to support people the best we can.”

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