Regular wages fell by a record 3% in April to June 2022, as the rates employers were able to pay failed to keep up with soaring inflation.
Growth in average weekly pay excluding bonuses was 4.7%. However, after inflation was taken into account employees’ wages were worth 3% less than they were in the same period last year, according to the Office for National Statistics’ latest labour market figures.
Total pay including bonuses was up by 5.1%, but represented a 2.5% reduction in pay when adjusted for inflation. Since August 2021, bonus payments have been strong, particularly in March 2022 and in the finance and business services sector.
Between April and June 2022, the consumer prices index including housing costs (CPIH) was an average of 8%. The Bank of England expects inflation to peak at 13% later this year.
Average total pay growth was 5.9% in the public sector and 1.8% in the private sector. The wholesale, retail, hotels and restaurants sector saw the largest rate of growth at 7.7%, followed by finance, business services and construction, both at 6.3%.
Real wages fall as inflation rises
Neil Carberry, chief executive at the Recruitment & Employment Confederation (REC), said the figures emphasised the need to tackle inflation and its effects on employers and workers.
“Private sector pay is growing at a robust pace – but increases are being eaten up by the current inflation rate,” he said.
Glassdoor’s UK economist Lauren Thomas said the cost of living was a priority for many jobseekers.
“On Fishbowl by Glassdoor, discussions about bills, the cost of living and inflation have spiked by 67% since last summer, while negative mentions of salaries and compensation on Glassdoor have increased 16% since 2020,” she said.
Employment rate and vacancies decrease
The latest labour force survey estimates for April to June 2022 showed that the UK employment rate decreased by 0.1 percentage point to 75.5% following months of post-Covid growth. Although the number of full-time workers increased, the number of part-time workers has fallen.
The number of job vacancies in May to July 2022 was 1.27 million, a decrease of 19,800 from the previous quarter – the first quarterly fall since June to August 2020.
Many businesses still face the ‘double whammy’ of having to pay new hires above-market levels simply to fill vacancies, at the same time as needing to incentivise – or risk losing – their existing skilled workforce.” – Helen Crossland, Seddons
Jonathan Boys, CIPD labour market economist, said: “There is evidence of slowing momentum in the labour market with the first quarterly decrease in vacancy numbers since mid-2020. However, the labour market remains incredibly tight with strong labour demand and candidates in short supply.
“The immediate problem for businesses is labour shortages. For now, there remains strong demand for their goods and services and staff are needed to deliver these. The redundancy rate remains near record lows showing that businesses are focusing as much on retention as they are recruitment to meet staffing needs.”
The REC’s Carberry said: “Employment is still much lower than pre-pandemic, while the number of people out of work and not looking for a job is much higher. Firms need to think carefully about their offer to potential staff in this environment, working with their recruiter. It’s clear that flexible forms of employment have a big role to play in closing the gap.”
Helen Crossland, a partner at law firm Seddons, said: “The economic challenges following Brexit and the pandemic, and workers reframing their career choices and expectations, continue to deliver testing times for employers. Many businesses still face the ‘double whammy’ of having to pay new hires above-market levels simply to fill vacancies, at the same time as needing to incentivise – or risk losing – their existing skilled workforce.
“The exceptional labour conditions pose jeopardy to employers in many ways, not only by employees demanding pay increases to compensate them for the cost of living rises and covering other staff shortages, but knowing that the negotiating power still rests with employees currently.“