Real pay falls for first time in two years

Workers suffered a fall in real pay for the first time in more than two years in January as inflation outpaced wage growth, underlining the fresh squeeze in living standards facing UK households.

British workers have suffered a decrease in their real pay for the first time in two years, according to new figures from the Office for National Statistics (ONS).

David Freeman, a senior statistician at the ONS, said:

“With the unemployment rate last lower in summer 1975 and the employment rate still at a record high, the labour market remains robust. But smaller wage increases and higher inflation mean the growth in real earnings has slowed sharply in recent months.”

Despite Britain’s unemployment rate falling to its lowest level since 1975, inflation has outpaced wage growth, sending average pay into decline.

The jobless rate fell to 4.7 per cent in the three months to January from 4.8 per cent in the previous three months, matching the rate last seen in 2005. It was last lower in the three months to August 1975, when it was 4.6 per cent.

Total pay growth slowed sharply from 2.6 per cent to 2.2 per cent in the three months to January, and real pay growth – adjusted for inflation – was just 0.7 per cent, the weakest in more than two years.

The ONS also confirmed that the number of people on zero-hours contracts hit a record high of 905,000 in the final three months of 2016. It was an increase of 101,000, or 13 per cent, compared with the same period a year earlier.

The report said that those with zero hours contracts were more likely to be young, female, part-time or in full-time education people in other employment. Such contracts are widely used by retailers, restaurants, leisure companies and hotels.

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