Real wages fall at fastest pace in nearly three years

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Data released  by the Office for National Statistics (ONS) shows that wages have once again failed to keep pace with inflation, leaving hundreds of thousands of people on low pay struggling to make ends meet.

Britain’s pay squeeze has intensified after wages growth fell further behind inflation, with regular pay growth slowing to 1.7 per cent year on year in the three months to April, from 1.8 per cent previously.

Inflation was much higher in April at 2.7 per cent, and jumped to 2.9 per cent in May.

However, the statistics also showed continued growth in employment, with the numbers in work rising by 109,000 in the three months to April, leaving the 16-64 employment rate at a record high of 74.8 per cent.

The numbers in unemployment fell by 50,000, leaving the headline jobless rate steady at 4.6 per cent, the lowest since 1975.

Stephen Clarke, economics analyst at the Resolution Foundation thinktank said:

“The terrible news on pay comes despite another strong jobs performance, with unemployment remaining at its lowest level in over 40 years,” said

“The sharp contrast between our terrible record on pay and strong jobs performance shows that the currency-driven inflation we are experiencing is not feeding through into wage pressures and is simply making us all poorer instead.”

Economists are predicting the wage fall will accelerate in the coming months, with inflation expected to rise above three per cent as firms limit pay rises as their own costs rise and the economy weakens.

“Ministers must focus on delivering better-paid jobs across the UK. And it’s time to bin the artificial pay restrictions on nurses, midwives and other public sector workers. Britain needs a pay rise, not more pressure on household budgets.”

Ian Brinkley, Acting Chief Economist at the CIPD, the professional body for HR and people development, added:

“The figures confirm that real wages have fallen again, the third month in a row, as measured by average weekly earnings.  This trend is likely to persist, as CIPD labour market surveys show that most employers expect to offer basic pay awards below the rate of inflation. The sharp fall in earnings growth is remarkably broad-based, which is due to a combination of persistently low productivity growth and a fall in confidence among employers about the future prospects for demand in the UK economy.  The better news is on the employment side, where unemployment has fallen and employment growth is almost entirely driven by more full time and permanent jobs.

“The only sustainable solution to weak pay growth is to address the fundamental cause, which is the UK’s poor productivity performance. The new government should not allow the current short-term political uncertainty and looming Brexit negotiations to distract from the need to address key issues, such as managerial quality, skills development for the whole workforce, and work organisation and progression. We hope that the Queen’s Speech will include a commitment to draw up a new long-term productivity plan based on consultations with a wide range of industrial and professional organisations and trade unions, including a clear focus on the workplace.”

 

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