Inflation drives fastest fall in real pay on record
Pay (real income) has fallen further behind the rising cost of living, according to the latest official data.
While average wages rose 4.7per cent between April and June, that was outpaced by inflation – or price rises – which is growing at a much faster pace.
As a result, the “real value” of pay fell by three per cent, according to the Office for National Statistics.
Household budgets are being hit by soaring energy bills as well as higher food and fuel costs.
The rise in prices has fuelled the UK inflation rate to a 40-year high. The latest inflation figure, due out on Wednesday, is forecast to be higher.
The gap between pay growth and inflation is the biggest since records began more than 20 years ago.
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Darren Morgan, director of economic statistics at the ONS said the “real value” of pay was continuing to fall. “Excluding bonuses, it is still dropping faster than at any time since comparable records began in 2001,” he said.
The data also highlighted a gap between public and private sector wage growth.
Private sector wages grew by 5.9per cent while those working in the public sector saw pay growth of 1.8per cent; which Mr Morgan said is the “largest difference we have seen for 20 years”.
The rising cost of living has prompted calls from workers and unions for pay rises, with some sectors, such as the rail industry, taking strike action in recent weeks.
More than 40,000 railway workers, who are members of the RMT union, are set to go on strike this Thursday and Saturday, but disruption is also expected on Friday because normal services may take time to resume.
Last month, the government announced pay rises for millions of public sector workers including teachers, nurses, doctors, police officers, and members of the armed forces.
However, most wage increases awarded were below the current rate of inflation of 9.4per cent, with ministers arguing large rises could cause inflation to remain higher for longer.
The Bank of England recently lifted interest rates by the largest amount in 27 years to 1.75per cent 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 was 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,” he said.