Workers suffer deepest pay squeeze since 1977
It marks the deepest pay squeeze in 45 years for British workers who are already struggling to cope with near double digit inflation pushing up the cost of living.
Though wages are rising with the Office for National Statistics recording growth in average total pay including bonuses of 5.1% while regular pay excluding bonuses was up 4.7% among employees between April to June 2022, when inflation is taken into account growth in total and regular pay fell on the year in April to June 2022 at 2.5% for total pay and 3% for regular pay – a record fall for regular pay since 2001 when records began.
The Resolution Foundation said the effects of last year’s furlough scheme added around 0.5 percentage points to measures of annual pay growth, meaning the true scale of Britain’s pay squeeze is even deeper than official figures suggest.
Nye Cominetti, senior economist at the think tank, said: “This squeeze has come about despite robust pay growth and a lively jobs market, with pay settlements strengthening slightly and almost a million people moving jobs in the last three months.
“There is no evidence yet of big wage-price spirals, rising unemployment, or a major return to work brought about by falling household incomes. Whether these trends materialise in the months ahead will help determine the scale and distribution of the latest economic crisis.”
The size of the labour market has remained unchanged in recent months with a slight fall in employment and rising inactivity undoing the recent good news on labour market participation.
While vacancy levels have fallen from record highs, the jobs market remains active with almost a million, some 948,000, people moving jobs in the past three months – well above typical levels of around 700,000.
However Myron Jobson, personal finance analyst at Interactive Investor, said there were signs “some heat has started to come off the red-hot jobs market amid fears of a looming recession”.
“The number of job vacancies in May to July 2022 fell by almost 20,000 from the previous quarter, marking the first quarterly fall since June to August 2020. However, jobseekers still are holding all the cards as employers desperately seek to attract and retain talent to take their business to the next level in what remains a tumultuous period for recruitment,” he said.
“It’s unclear how long it will remain a jobseeker’s market, given the Bank of England’s move to up borrowing costs to rein in ballooning inflation and recession increasingly likely.”