The rising cost of living erodes wages
Real wages dropped by 1.2% in the first three months of the year when the impact of inflation was taken into account, according to the Office for National Statistics (ONS).
The rise in the cost of living hit 7% in March, wiping out the 4.2% increase in regular pay.
Total pay including bonuses increased by 7% to keep pace with inflation, the data showed.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said the wage data showed a divide between the private and public sector.
She added: “Those who receive bonuses have seen their pay outstrip inflation over the past 12 months, and those with big bonuses have seen it soar.
“The bonus-heavy finance and business services sector saw pay up 10.7% – way ahead of rising prices.
“However, without bonuses, pay dropped 1.2% after inflation. It’s one reason why there are eyewatering differences between the sectors.
“Public sector pay is up just 1.6%. This is effectively a serious pay cut for 5.72 million people.
“The gap between pay rises in the public and private sector is among the biggest the ONS has seen.”
The ONS data also showed that unemployment fell to 3.7%, the lowest seen since 1974, while employment increased to 75.5%.
Total job-to-job moves increased to a record high of 994,000. And for the first time since records began, there are fewer unemployed people than job vacancies.
Danni Hewson, AJ Bell financial analyst, said: “There’s been a record number of people moving job over the last quarter as the cost the living squeeze really begins to grab hold of the country suggesting workers are chasing higher pay in an increasingly tight labour market.
“For the first time since records began there are more vacancies than people out of work, a situation that’s forcing employers to adopt whatever methods they can to tempt workers to jump ship.
“People power the motor, without them businesses can’t function properly, but businesses are also struggling with rising costs and looking at where those vacancies are still sprouting up it’s the larger companies, those that have deeper pockets which are still hiring whilst the smallest employers are cutting back.”