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UK wages are rising – but not fast enough to keep up with soaring inflationDate Posted: 5 March, 2022
The latest data for UK wages shows that average pay increased at the end of 2021, but it’s still lagging behind the soaring cost of living.
The Office for National Statistics (ONS) has released new figures showing that in the period from October to December last year, wages rose by 3.7% compared to the same time in 2020. This growth is also considered high compared to previous rates recorded over the last decade.
However, when inflation is taken into account, pay in real terms actually fell by 0.8% compared to the previous year. When bonuses are factored in, ONS data shows that real pay dropped by 0.1% compared to 2020.
Job vacancies increase and more people moving into work
Other key findings from the latest ONS report shows that the number of UK job vacancies hit a record high of 1.3 million in January 2022. And the number of employees starting new jobs also rose to a new high of 29.5 million, an increase of 108,000 compared to the previous month. The UK unemployment rate fell to 4.1%.
Chancellor Rishi Sunak claims these figures represent a growing confidence among businesses, and a healthier jobs market than expected in the wake of the Covid-19 pandemic. According to the Guardian, he said:
“We’re continuing to help more people into work, and are providing support for the cost of living worth over £20bn across this financial year and next.”
However, there are increasingly urgent concerns that a cost-of-living crisis is coming in April, when energy costs soar by hundreds of pounds per household and new National Insurance rises kick in.
When this happens, economists are predicting that UK inflation will rise to a record 8%, well beyond the highest point the Consumer Prices Index (CPI) rate has reached in the last 30 years. This will push real-terms wages down even further, while also causing headaches for businesses.
Businesses facing “squeeze” on finances
Soaring job vacancies have meant an extremely tight recruitment market, where firms facing urgent labour and skills shortages are battling to secure the best talent.
With living costs rising to uncomfortable levels, the most in-demand employees now have expectations for higher salaries. And not all firms are able to compete when it comes to salary, especially when facing higher costs for energy, supplies and goods themselves.
The head of economics at the British Chambers Commerce (BCC), Suren Thiru, explained to the Guardian how financial pressures are holding firms back in their post-Covid recovery plans:
“While Omicron is having little impact on employment, the squeeze on firms’ finances from high inflation, soaring energy bills and the looming national insurance hike is likely to weaken job creation and further restrain pay growth in the coming months.”
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