Average real pay falls for 18th consecutive month

ONS has published new data on average pay in the UK.

In April 2023, average weekly pay (including bonuses) was up 7.5% year-on-year, which is very high by historical standards – the highest rate of growth on record, outside of the COVID period.

Pay growth for public sector workers continues to strengthen, with average public sector pay up 5.6% YOY.

Whilst pay growth is high, it continues to lag behind inflation, meaning that the real value of pay continued to decline in April – real pay has now been falling for about 18 months, as shown in the chart below.

Click chart to enlarge

However, the rate of inflation appears to have peaked and is beginning to fall. If pay growth remains strong, it is possible that it will eventually overtake inflation, allowing real pay to recover.

Data from the Bank of England’s Decision Makers’ Panel suggests that employers in the UK anticipate that pay will continue to grow in the short- to medium-term.

However, given the significant fall in real pay over recent months, it would take an extended period of very strong pay growth to rebuild the losses to household incomes already suffered.

Taking a longer-term view, demographic shifts in the UK and in other European countries suggest that the supply of workers is likely to remain static or to decline slowly.

This means that steady upward pressure on wages should be expected, even after economic “normality” is restored.