New ONS data shows that regular pay (excluding bonuses) in the UK is rising at the strongest rate seen outside of the COVID-19 period, however, it continues to fall behind inflation.
The growth rate in average weekly earnings in December 2022, including bonuses, fell slightly to 5.9% year-on-year. This is primarily due to higher-than-normal December bonuses paid in December 2021.
However, even the growth in regular pay, driven by high labour demand and limited supply, is unable to keep pace with inflation, with most workers seeing their wages fall behind the cost of living, meaning a “real terms” reduction.
Using the wider RPI measure of inflation, which gives a wide coverage of housing costs, “real wages” have been falling since October 2021 and are now down 7.8% year on year.
In our latest Viewpoint Report: From inflation to recession: what to watch out for in 2023 we predict that inflation will fade over 2023. However, with real wages falling at nearly 8% year-on-year, wage growth will have to see a significant and sustained rise for households to see an improvement in their living standards.
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The gap between public and private sector pay closed slightly. Public sector pay growth rose by 4.2% year-on-year in December, up from 3.3% from the previous month. This may suggest that some public sector labour disputes are being resolved.
The still wide gap is crucial to understanding why the number of working days lost to strikes has become more prevalent since Summer 2022.
The number of days lost over December 2022 was the largest number since November 2011, which itself was the highest number of days lost since the late 1980’s.
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