UK wages in June fall at fastest pace in 20 years | Inflation

The real value of British workers’ wages continued to fall at the fastest pace for 20 years in June as wage increases were outpaced by soaring inflation amid a cost of living crisis.

The Office for National Statistics said annual growth in the average wage, excluding bonuses, strengthened to 4.7% in the three months to June amid low unemployment and high vacancies .

However, the real value of workers’ pay packages fell 3% – the fastest decline since comparable records began in 2001 – after factoring in its preferred measure of inflation.

Growth in average earnings, including bonuses, was 5.1%, but it also failed to keep pace with the soaring cost of living.

The latest snapshot showed early signs of a slowdown in hiring demand among employers despite vacancies remaining near a record high. The ONS said unemployment rose slightly to 3.8% in the three months to June, while the number of new job vacancies fell for the first time since the summer of 2020.

Job growth slowed to 160,000 in the three months to June, well below analysts’ forecasts, suggesting the labor market is starting to cool as Britain’s economic performance falters .

Ruth Gregory, senior UK economist at consultancy Capital Economics, said: “June’s labor market figures revealed further evidence that the weak economy is leading to a slightly less tight labor market.”

Chancellor Nadhim Zahawi said the latest figures showed the UK labor market was in a strong position, with unemployment lower than at almost any time in the past 40 years. “[That is] good news in what I know are tough times for people,” he said.

“While there are no easy solutions to the cost of living pressures people are facing, we are providing help where we can. We are providing a £37billion support package to households through cash grants and tax cuts so people can keep more of what they earn.

However, the figures highlighting the unprecedented hit to workers’ wages are likely to add pressure on the government and Tory leadership candidates amid the cost of living crisis.

Labor said the figures showed the Tories had lost control of the economy. Jonathan Ashworth, Shadow Work and Pensions Secretary, said: ‘This zombie government offers no solution to the cost of living crisis.

Inflation as measured by the consumer price index hit 9.4% in July, its highest rate in 40 years. With a further rise in energy bills expected this autumn, the Bank of England expects inflation to peak above 13%, alongside a long recession, as households get spending under control.

Frances O’Grady, general secretary of the Trades Union Congress, said the figures showed urgent government action was needed to support households ahead of a tough winter. “They should cancel the energy price cap increase. And they need to do much more to raise wages — starting with raising the minimum wage this fall and giving public sector workers a decent pay raise.

Wage data revealed a widening gap between public and private sector workers, with private sector wages rising 5.9% over the past year, more than three times the growth rate of 1.8 % of public sector.

According to an analysis by the accounting firm PricewaterhouseCoopers, the wages of the richest 1% of workers have increased by almost four times the rate of the poorest 10th, highlighting how some households are more isolated than others from the cost of living crisis.

The Resolution Foundation said the scale of the wage squeeze was greater than official figures suggest, with the real value of average weekly wages falling the most since the Queen’s Silver Jubilee in 1977.

Nye Cominetti, senior economist at the think tank, said: ‘This squeeze has come despite solid wage growth and a buoyant labor market, with wage deals strengthening slightly and almost a million people changing. employment in the last three months.”

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