New data from ONS shows that average pay growth in the UK exceeded the rate of inflation in July 2023, meaning that pay rose in “real terms” for the first time in nearly two years.
ONS has published new data on the UK labour market and pay rates, covering July 2023.
Some labour market measures suggest that demand for labour is weakening, a little – unemployment is up and vacancies are down. However, pay growth is strong, suggesting that workers still have the upper hand in negotiations.
Average weekly earnings continue to rise quickly, by historical standards, up 8.0% year-on-year in July (+7.6% for private sector workers and +10.6% in the public sector).
Strong growth pay in the public sector may be associated with recent major pay deals following high-profile industrial disputes, with disputes ongoing in some areas.
With CPI inflation declining - but still strong - in July, wages have begun to exceed inflation, moving back into “real growth” for the first time since Autumn 2021 (for now, RPI inflation still slightly exceeds wage growth).
Note that ONS data shows pay before taxation – actual income for workers will be lower than stated and their financial position will be affected by taxes and benefits. We may gain more insight into future tax policy when the Chancellor issues the Autumn Statement on 22 November.
News that real value of wages has risen year-on-year is very welcome and may help to bolster the confidence of UK consumers. However, inflation has eroded the value of wages significantly over the last two years and it will take some time for wages to return to the previous level and many will remain under pressure due to rising interest rates and taxation.
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