Workers are continuing to see their pay grow faster than the rate of inflation, however, it will take some time for household prosperity to recover lost ground during the cost-of-living crisis.
The latest ONS data shows that strong pay growth seen in 2023 has been maintained, but the pace of change is slowing.
The average weekly total wage (including bonuses) rose by 8% in August, down from 8.5% in July, indicating a slightly cooling labour market.
There has been a significant growth in the wages of public sector workers in recent months. Annual average regular pay growth was 6.8% in June to August 2023, the highest annual growth rate since records began in 2001.
Strong pay growth in the public sector has been affected by one off payments made to NHS and civil service workers in June, July and August.
Private sector workers are also experiencing significant annual wage growth, reaching 8% in the period June to August 2023, one of the largest annual growth rates seen outside of the COVID-19 period.
With inflation declining slowly over 2023 and wages continuing to rise, ‘real pay’ has turned positive in recent months, slightly relieving some of the pressure on households.
As workers’ pay growth continues to be strong as inflation fades, it provides an opportunity for households to recover some of the lost ground over recent years.
However, with overall inflation declining slowly and workers’ wage growth likely to have peaked in July, we may be set for a period of low ‘real wage growth’ for the foreseeable future.
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