As unemployment in the UK drops by 18,000 to reach 2.49 million, data from the Office of National Statistics shows that wages have been dwarfed by inflation, with annual pay increases barely rising above a quarter of the inflation rate.
Britain’s burgeoning economic recovery may be picking up steam, but workers have yet to feel its effect in their pockets, with prices growing nearly four times faster than the 0.7 per cent rise in wages.
According to the latest official report on the labour market, the number of working Britons has hit an all-time high, reaching 29.87 million people.
Unfortunately, the strengthening labour market has yet to be reflected in the type of wage growth analysts have been expecting, failing to turn signs of recovery into a full-blown economic upturn.
In fact, the 0.7 per cent rise in wages from June to August is the weakest figure the UK has witnessed since this form of data collection began in 2001. In August, inflation was sitting at 2.7 per cent, marking a dangerous ratio.
These latest ONS figures will help strengthen Labour’s claims that ordinary families are suffering from a “cost-of-living crisis,” even though the economy appears to have “turned a corner.”
Workers in the public sector are suffering from particularly weak pay. The ONS data reveals that pay for public workers has actually declined by 1.6 per cent throughout 2018. State-backed banks are responsible for the majority of this declining pay rate, thanks to diminished bonuses and a workforce that is turning to lower-paid staff.
According to John Philpott of the Jobs Economist, public sector workers are experiencing a significant “pay squeeze,” and the extent of this real wage squeeze is “not conducive to a sustained UK economic recovery.”
Closely tracked by the Bank of England, the unemployment rate between June and August has remained unchanged at 7.7 per cent.
Although the unemployment rate has remained unchanged, analysts believe other positive employment news suggests the Bank of England may have to raise interest rates and tighten monetary policy before the unemployment rate reaches the seven per cent benchmark.
James Plunkett of the Resolution Foundation said, “This data has clearly established that wages has suffered a tough downturn.” He continued, “The recent fall in real wages is unprecedented.”
Perhaps most disturbing is the fact that the wage squeeze does not appear to be ending any time soon. Despite flourishes of positive economic news, the gap between inflating prices and stagnant wages is wider now than it was during the same time last year.