Average weekly earnings figures for July-August 2023 showed pay growth above inflation for the first time in two years, with public sector pay growing at its fastest rate on record.
Annual growth in regular pay excluding bonuses was 7.8% in June to August 2023, according to October’s average weekly earnings figures from the Office for National Statistics.
Adjusted for inflation, regular wages increased by 1.1% compared with the same period last year. It was last higher in July to September 2021, when regular real pay rose by 2.2%.
Inflation measured via the consumer prices index including owner occupiers’ housing costs (CPIH) was 6.3% in the 12 months to August 2023.
Growth in total pay including bonuses was 8.1%, but when adjusted for inflation total pay rose on the year by 1.3%.
Regular pay in the public sector rose by 6.8% in June to August – the highest regular annual growth rate since 2001 – and was driven by strong pay awards following industrial action in many public sector roles.
Private sector employees saw an 8% increase in regular wages, rising to 9.6% in the finance and business services sector. Manufacturing saw wages grow by 8%, one of the highest annual regular growth rates for this sector since comparable records began in 2001.
Estimates from employers’ PAYE submissions to HMRC showed that median monthly pay in September increased by 5.7% compared with September 2022, and 21.7% compared with February 2020.
However, Ben Harrison, director of the Work Foundation at Lancaster University, said the headline figures do not show the full picture.
“Ultimately the data suggests that with inflation still above 6%, workers’ real wages have only grown by 1.1% on the year, and many in lower-paying sectors like construction and retail are likely to have seen no growth at all,” he said.
“With temperatures plummeting and cost-of-living pressures still high, it is welcome the chancellor has announced the national living wage will rise for over two million low-paid workers in April. But further talk from the Prime Minister and chancellor of tougher benefit sanctions will only heighten anxiety amongst people in low-paid and insecure work who are already on the edge of employment.
“While we await further labour market data this month, it is likely vacancies will continue to drop as the labour market slows amidst economic uncertainty and the chancellor must use his upcoming Autumn Statement to provide additional support to workers, jobseekers and employers.”
Jon Boys, senior labour market economist for the CIPD, said a 1.1% increase in pay is not much, but would have been welcomed by many.
“The cost-of-living crisis is easing but it’ll be some time before pay packets weigh as much as they did in early 2021,” he said.
“Alternative PAYE estimates data from HMRC suggests that pay growth is easing and grew by 5.7% in the year to September. Many employers will be relieved to see pay growth easing as it reflects a higher cost of doing business.
“However, recruitment and retention remain challenging, and employers must work hard on the total employment package to keep staff motivated and help alleviate the burden of the cost-of-living crisis. Paying attention to things people value such as flexible working and making use of benefits like salary sacrifice can boost the value proposition of employment.”
The number of vacancies in July to September 2023 was 988,000, a decrease of 43,000 from April to June 2023. This was the 15th consecutive fall in vacancies, according to the ONS’s vacancies and jobs figures.
Employers must work hard on the total employment package to keep staff motivated and help alleviate the burden of the cost-of-living crisis” – Jon Boys, CIPD
The industry that decreased the most was human health and social work activities, where the number of vacancies fell by 40,000.
Chris Gray, director at recruitment agency ManpowerGroup UK, said: “Employers continue to show signs that they’re interested in hiring but there is less action underway to back up this intent, as they take stock of uncertainties which include high costs, a changing political landscape, and evolving expectations and demands from within the workforce. As such we’re seeing a gradual decline in job vacancies.
“The tug of war between employers and employees over wages has undoubtedly impacted on this reset – putting the brakes on in many sectors, as businesses grapple with skills shortages and the need to attract new talent while also working hard to retain existing employees by supporting them with the impact of high inflation on the cost of living. It’s a mixed picture overall but still with many reasons to be cautiously optimistic, not least for our retail, leisure and hospitality sectors which should see some seasonal uplift as we begin to approach the festive period.”
Neil Carberry, REC chief executive, said: “Permanent hiring has been dropping in the UK for most of the year, reflecting employers’ concerns about inflation and the performance of the broader UK economy. Even so, vacancies remain above their pre-pandemic level.
“Businesses tell us that they feel quite confident about the resilience of their own businesses, and are ready to invest as the economic picture improves, which provides some hope of a turnaround in hiring in the next few months.”
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