Real pay continues to fall

Date : 19 May 2022

The ONS has revealed that real pay levels over March continued to fall due to the impact of rising inflation.

The average weekly wage is rising, total pay (incl. bonuses) is up 7% and regular pay is up 4.2% over the year to March 2022.

However, adjusting for the impact of RPI inflation, the broadest measure of household inflation, the increased value of work is lost. Overall, workers are 1.3% worse off than a year ago.

Click chart to enlarge

The chart above does illustrate that total wages are beginning to catch up to inflationary pressure, however this has been primarily driven by strong bonus growth over March.

Removing the effect of bonuses, which tends to benefit higher earners, inflation is outstripping wage growth by 4.2%.

Using RPI and taking out the impact of bonuses is a better measure at capturing the fall in real wages that average households are dealing with.

Earlier this year, the Office for Budget Responsibility forecast that real incomes would fall by 2.2% over 2022, the largest fall since records began. This is based on the CPI measure of inflation.

The concern for shoppers and policy makers alike is that inflation is expected to peak higher, up to around 10% on the CPI measure in Autumn.

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