UK wages in May 2022 continued to be eradicated by rising inflation, with the value of employees’ regular pay falling by 2.8% despite employers awarding strong pay increases.
The latest labour market figures from the Office for National Statistics (ONS) show that employees’ average total pay including bonuses grew 6.2% and pay excluding bonuses increased 4.3% in March to May 2022.
However, when adjusted for inflation, which hit 9.1% at the consumer prices index measure in May 2022, pay including bonuses fell by 0.9% and regular pay by 2.8% compared with the same period last year.
The consumer prices index including owner-occupiers’ housing costs, which the ONS offsets its pay estimates against, rose to 7.9% in the 12 months to May 2022, up from 7.8% in April.
Average total pay growth for the private sector was 7.2% in March to May 2022, and for the public sector it was 1.5%. The finance and business services sector and construction sector showed the largest growth rates at 8.2% and 8.1%, respectively, partly because of strong bonus payments.
CIPD labour market economist Jonathan Boys said employers have a a role in helping staff through the cost of living crisis, but acknowledged that many will not be able to afford pay awards that are in line with or above inflation.
“Striking a balance between a fair pay award and addressing cost pressures will be a prominent theme for many employers this year,” he said. “CIPD research suggests that better use of existing benefits can have a similar effect to pay as it can make people materially better off. Certain fringe benefits can offset household costs like housing, travel, and childcare.”
Ben Harrison, director at the Work Foundation at Lancaster University, warned that the situation is likely to worsen for employees, with the Bank of England predicting that inflation will rise to 11% by the end of the year.
“The harsh reality is it will be acutely worse for the six million people in the UK who are in severely insecure work, and already face low pay and uncertain hours,” said Harrison, who called on the next prime minister to publish a plan for how they will support the most in need as the cost of living surges.
Demand for talent remained strong in the spring, with the ONS figures showing that the number of vacancies grew to 1.29 million – however this rate of growth has been slower than in previous quarters.
The number of full-time employees reached record levels, while there was also an increase in part-time workers. However, total weekly hours worked is still below pre-pandemic levels, despite increasing by 6.5 million hours during the three-month period.
The economic inactivity rate decreased by 0.4 percentage points to 21.1%, however this is still 0.9 percentage points higher than before Covid-19.
Neil Carberry, chief executive of the Recruitment & Employment Confederation, said many employers were still struggling to source candidates, which could affect economic growth over the longer term. He urged both business and government to bring long-term workforce planning to the front of their minds.
“Businesses will have to think differently about how they hire, upskill and treat their staff, in collaboration with recruitment experts. Meanwhile politicians need to think holistically about how the skills and immigration systems – as well as supporting structures like childcare and local transport – can help create a more sustainable labour market,” said Carberry.
David McCreadie, managing director of IT recruitment consultancy, Swi-tch, said some businesses were offering 15-20% increases on pre-pandemic salaries in order to attract candidates.
“The issues businesses face is that with employees holding all the cards, if employers do not offer flexibility and pay increases, their competitors will. You are no longer competing with local businesses now that travel and location are no longer a major factor. The entire country has opened up to employees so employers need to do everything they can to retain and attract them,” he said.
The Centre for Ageing Better highlighted the fact that 26.8% of all people of aged 50-64 are economically inactive, up from 25.4% before the start of the pandemic, and urged the next prime minister to make getting these people back into the workforce a priority.
Its deputy director for work, Emily Andrews, said: “We’ve heard little or nothing about the skills shortage in the leadership contest so far, but all the data from the labour market indicates this is a major headache for the UK economy.
“Ageing Better recognises the positive steps DWP are taking to tackle the challenges around older people and employment in this country – including further development of mid-life MOTs. But much of the newly announced support will take place in Jobcentre Plus, and so will not help older workers who have disengaged with the labour market altogether.
“These targeted actions for 50-plus jobseekers need to be backed-up with action to solve the workforce crisis the country is actually facing: with employment and training support for those who are not claiming benefits, and broader action to tackle an ageist labour market that is shooting itself in the foot.”
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