The increasing inflation is leading to exorbitant food and fuel prices, which are becoming unaffordable for certain individuals. To prevent falling into poverty while employed, many people are relying on salary increases to offset the impact and improve their earnings. A detailed collection of labor union strikes can be accessed to negotiate for higher wages. To understand the present situation, we will examine the past patterns of real wages in the UK.
Wages and Inflation: A Look at Polls and Trends
How do polls reflect the state of wages? Recent YouGov polling sheds light on this matter, revealing that out of those who sought a salary increase in 2022, just over a quarter achieved their goal. However, when it comes to gender disparities, the numbers paint a concerning picture. Only one in five women who asked for higher pay were granted their request, while just under a third of men had their salaries increased – highlighting one contributing factor to the persistent gender pay gap.
Shifting gears to inflation rates, there is some positive news to report. In June, inflation declined more than anticipated and settled at 7.9%. This unexpected decrease eases worries about potential mortgage rate hikes by the Bank of England over the next year.
Additionally, there are interesting developments in fuel prices and food costs. The Office for National Statistics (ONS) reports that car fuel prices are on a downward trajectory – welcome news for consumers’ wallets. On the other hand, while food prices continue to rise steadily, it appears that they are doing so at a slower pace compared to June 2022.
In summary: polls indicate mixed results regarding wage increases; inflation rates have taken a more favorable turn, calming concerns about mortgage rates; and there are diverging trends in fuel and food prices.
Diverse Realities of Wage Growth
As mentioned by the ONS, official data indicates that the average monthly earnings (excluding bonuses) across the economy climbed by 7.3% during the three months leading up to May this year. This surpasses the typical growth in revenues; however, when adjusted for inflation, the actual value of wages decreases. Furthermore, this unusually substantial wage increase is perceived differently across different segments of British society. Notably, a significant disparity exists in the pace of wage increases between the private and public sectors, encompassing fields like education and healthcare. On average, wages in the public sector increased by 5.8% during the same period, whereas the private sector witnessed an average growth of 7.7%. Data from the Office for National Statistics illustrates that since January, annual wage hikes are becoming more generous only among the top 10% of earners, while the rest of the workforce is experiencing a decline in wage growth. This situation underscores a crucial aspect concerning the trajectory of real wages in the UK over time.
Income Disparity Trends in the UK
An examination conducted by the TUC using official data also reveals that individuals within the top 1% of earners, boasting an annual income of no less than £180,000, encountered a 7.9% increase compared to the previous year, which marked a substantial rise from the 3.7% reported in January. Conversely, employees earning £59,000 annually experienced a reduction in the rate of their wage growth from 7.2% to 5.5% per year. Similarly, workers receiving £26,300 a year witnessed an even more pronounced decline in their annual wage increments, dropping from 9.5% in January to 4.7% in April. This recurring trend is discernible within the context of Real Wage UK over an extended period. It’s worth noting that the previous year saw allegations attributing the rise in inflation to surging gas and electricity costs and higher food prices.
Several signs of a slowdown in the labour market tempered the inflation pressure
The unemployment rate suddenly rose to 4.0% from 3.8% in the three months to April, and the number of people out of work has grown by the most since late 2020. Job vacancies extended their run of falls to their lowest since mid-2021. The Bank of England is worried to head off the risk of a wage-price spiral. Over half a million people have dropped out of the UK labour market since the pandemic, prompting businesses to sweeten pay and perks to tempt people back into work. They’re still struggling to recruit enough staff, with vacancy numbers almost matching unemployment.
The result has left inflation near a four-decade high, incentivizing workers to change jobs or demand higher pay, many of them by striking. According to the Office for National Statistics, Reed’s data shows that median salaries for new jobs are up about 10% from a year ago between February and April, close to the current inflation rate and well beyond the national average wage increase of 6.3% in March.
Headline inflation in the UK has fallen to 7.9% – down from May’s figure of 8.7%, but the recession threat stays still
The drop is more significant than anticipated, exceeding analysts’ predictions of 8.2% for the current month. Core inflation, excluding the more volatile factors of food and fuel prices, has declined from 7.1% to 6.9%. This metric is considered a more accurate gauge of the economy’s performance and is closely monitored by the Bank of England to inform interest rate decisions. While UK inflation is declining, it still surpasses the average levels seen in Europe and other major economies, hovering just below 9% year-on-year. Despite marginal growth in GDP during April, inflation remains near a four-decade high. The Bank of England (BoE) maintains its focus on curbing inflation. It will likely continue raising interest rates well into the third quarter, extending into the year’s fourth quarter. This approach carries the risk of pushing the economy toward a recession.
Drawing from data by the ONS, the public sector’s expenditures exceeded its income from taxes and other sources in June 2023, resulting in the need to borrow £18.5 billion. This borrowing represents the third-highest figure for June, trailing only behind the records set in 2020 and 2022. Notably, this borrowing amount was £0.4 billion less than the previous year and deviated by £2.7 billion from the Office for Budget Responsibility’s (OBR) forecast.
Furthermore, the UK house prices growth rate has continued deceleration. The price escalation rate for goods and services eased to 7.3% in the year leading up to June 2023, down from the 7.9% observed in May.
Adults in Britain are becoming more likely to say they are using their savings to manage the increased cost of living
A person was considered to be financially vulnerable if three or more of the following apply to them:
- Being unable to afford an unexpected but necessary expense of £850
- borrowing more money or using more credit than usual, in the last month, compared with a year ago
- Being unable to save in the next 12 months
- finding it very or somewhat difficult to afford energy bills
Some 3 in 10 (30%) reported using their savings, according to our latest Public opinions and social trends bulletin from 28 June to 9 July 2023. That was up from a quarter (25%) of adults who reported doing this in late April 2023. Around 6 in 10 (60%) adults said that their cost of living had increased compared with a month ago, although this proportion has gradually decreased since early April 2023. When asked about the critical issues facing the UK today, people were most likely to cite the cost of living (92%), followed by the NHS (88%), the economy (79%), climate change and the environment (62%) and housing (62%).