WORKERS PLUNGED INTO DEEPEST PAY SQUEEZE SINCE THE SILVER JUBILEE
Posted on 28th August 2022
Real average weekly earnings fell by 3 per cent in the three months to June, the biggest fall since 1977, the Resolution Foundation had said in response to recent latest ONS labour market statistics.
The latest data is dominated by near double-digit inflation, which according to the Foundation's analysis of longer-term ONS and Bank of England pay data, has brought about the deepest pay squeeze in 45 years.
It adds that with the effects of last year's furlough adding around 0.5 percentage points to measures of annual pay growth, the true scale of Britain's pay squeeze is even deeper than official figures suggest.
This deep real pay squeeze has come about despite robust nominal pay growth and a tight labour market.
Regular pay grew by 4.7 per cent in the three months to June, while total pay including bonuses grew by 5.1 per cent. The Foundation notes that the shrinking gap between regular and total pay levels suggests that some of the bonuses and one-off payments that have boosted total pay in recent months are now showing up in higher pay settlements, providing a longer-term boost to pay packets.
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 (948,000) people moving jobs in the last three months, well above typical levels of around 700,000.
Nye Cominetti, Senior Economist at the Resolution Foundation, said "Near double-digit inflation has brought about the biggest pay squeeze in Britain since 1977 as pay packets shrink by around 3 per cent. 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.
"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."
For more information visit resolutionfoundation.org