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Drop in real term pay erodes spending power of millions of Britons

.  (Evening Standard composite)
. (Evening Standard composite)

Sky-high inflation eroded the spending power of millions of families across Britain as the cost-of-living crisis hit hard at the start of the year, official figures revealed on Tuesday.

Real terms regular pay, which excludes bonuses and takes into account inflation, fell two per cent in the January to March period, compared to a year earlier.

If bonuses are included, the drop is a steeper three per cent, according to the data from the Office for National Statistics.

ONS director of economic statistics Darren Morgan said: “Despite continued growth in pay, people’s average earnings are still being outstripped by rising prices.”

Growth in average total pay (including bonuses but not inflation) was 5.8 per cent and growth in regular pay (excluding bonuses) was 6.7 per cent among employees in January to March 2023.

But this did not keep up with the level of inflation, hence the real term falls ins wages.

Shadow work and pensions secretary Jonathan Ashworth said: “Family finances are being squeezed to breaking point by a further fall in real wages, fewer people are in employment than before the pandemic and the number of people out of work due to long-term sickness has reached a record high.”

Ben Harrison, Director of the Work Foundation at Lancaster University, added: “Workers are facing a painful Groundhog Day on pay. For the 16th consecutive month regular pay has fallen – it’s now 2.0% lower on the year as double-digit inflation outpaces any wage increases.

“This highlights the pressure facing the UK’s six million workers in low paid and insecure jobs, who are being hit hardest as the cost of living continues to bite.”

Average regular pay growth for the private sector was seven per cent and for the public sector was 5.6 per cent in January to March 2023.

There were 556,000 working days lost because of labour disputes in March 2023, up from 332,000 in February 2023.

The rate of UK unemployment rose to 3.9 per cent in the three months to March from 3.8 per cent in the previous three months, the Office for National Statistics said.

Mr Morgan added: “Employment and unemployment both rose again in the first three months of 2023, driven in particular by men.

"This means the number of those neither working nor looking for work continues to fall, although the number of people not working due to long-term sickness rose again, to a new record.

"However, the number of people on employers' payrolls fell in April for the first time in over two years, though this is an early estimate that could be revised later.”

Employment minister Guy Opperman said: “We’re continuing to see progress in the labour market as we take action across government to grow the economy. Employment is up; economic inactivity is down; and vacancies have fallen in successive quarters.

“As well as helping deliver on our priority to grow the economy, we know that being in work remains the best way for people to get on in life.”