September 28, 2022

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UK real wages are falling at a record rate as inflation rises

UK real wages are falling at a record rate as inflation rises

Data from the UK’s Office for National Statistics released on Tuesday showed that real wages fell at a record pace in June, while unemployment remained at its level.

Jason Alden/Bloomberg via Getty Images

LONDON – Real wages in the United Kingdom, which reflects the strength of employee salaries after accounting for inflation, fell 3% year-on-year in the most recent quarter, according to data released by the Office for National Statistics on Tuesday.

While average wage — excluding bonuses — rose 4.7% in the April-June period, according to the Office for National Statistics, the cost of living is increasing at a faster rate and outpacing wage growth.

This affects how far wages advance in workers’ daily lives, said Darren Morgan, director of economic statistics at the Office for National Statistics.

He commented, “The real value of wages continues to fall. Except for bonuses, it is still falling faster than at any time since comparable records began in 2001.”

Rising energy and food bills are putting pressure on families in the UK. The cost of living crisis continued to grip the country, with consumers’ purchasing power declining.

UK inflation rose to a 40-year high of 9.4% in JuneIt is expected to rise by more than 13% by October. The Bank of England It responded to the price hike earlier this month by Raising interest rates by 50 basis points to 1.75%. The largest single increase in 27 years.

Inflation and price hikes are the main concerns for workers at the moment, said Lauren Thomas, UK economist at employment website Glassdoor.

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“The only constant in 2022 is change and skyrocketing prices. Even with high wage growth and a tight labor market, workers are feeling the pinch with inflation emerging as the biggest winner. With real wages dropping by a record 3.0 percent thanks to inflation, the cost of living is a priority for many. of job seekers.

Data from the Office for National Statistics also showed that unemployment remained stable at 3.8%, while job vacancies declined over the same time frame.

James Smith, advanced market economist at ING, said the Bank of England will pay close attention to both wage growth and the unemployment rate in the UK.

“The Bank of England’s official forecast is for a substantial increase in the unemployment rate over the next two years, but policymakers will look for signs that companies are ‘bunking’ staff even as margins shrink, amid concerns about their ability to re-employment again into the future. He has decent momentum at the moment, and the committee will be concerned that this can continue,” he said.

Looking ahead, this could mean a sharp increase in interest rates by the Bank of England, Smith adds:

“For now, we believe there is not much in these latest numbers that will prevent the BoE from raising rates by 50 basis points again in September, even if we are close to the end of the tightening cycle.”