With inflation running at record highs and wages stagnating, a trip to a UK supermarket for the weekly shop can be an anxious experience.
Businesses say they are trying to support staff who are feeling the pinch during the cost of living crisis, but can’t afford to hand out large pay rises to cover the gap.
So are they telling the truth? We take a look at the stats.
My salary has barely increased in a decade. Is this normal? You’re certainly not alone. Over the past 15 years, average wages in the UK have risen only a fraction. With the cost of living going up sharply, everyone is feeling worse off. In the three months to January 2023, pay grew by 5.7%, which sounds great – but when adjusted for inflation it actually fell by 3.2%.
How much am I missing? According to the Resolution Foundation, if wages had continued to rise at the speed they did before the 2008 financial crash, the average worker would now be taking home £11,000 a year more than they are today.
Ouch. Will it get any worse? Unfortunately, yes. According to an analysis by the TUC of the latest data from Organisation for Economic Co-operation and Development (OECD) nations, real wages – which means your wages adjusted for inflation – in the UK are set to fall by 3% during 2023.
Hang on, I already can’t afford my bills. Everyone is struggling due to the rise in the cost of living. Inflation ran at 9% overall in 2022, topping 10% before Christmas – a record high – and is predicted to be 6% during 2023.
So why isn’t my company paying me more? Bosses say they are “trapped” between a desire to help staff and the financial impact of inflation on business costs. According to The Work Foundation, less than 20% of businesses said they had awarded pay rises to help employees tackle inflation and only 17% had paid out one-off bonuses. Two-fifths said they had experienced increases in production costs.
No wonder everyone is on strike! Exactly. And staff feeling undervalued could also be contributing to the crisis around UK labour productivity, which only increased by 0.3% in 2022 – which in itself wasn't much better than the average trend dating back to 2008 of 2%.
Maybe I should get another job that pays more. That’s not a bad idea. Last year active job vacancies rose to 1.3 million despite real wages falling, a head scratcher for economists who usually observe that wages rise when the demand for staff out-strips labour supply.
What should I be looking for? Jobs in IT, finance and law were among the best paid in 2022, however everyone in low-paid work will be getting a pay rise this weekend as the new minimum wage of £10.18 comes into force. Happily, fewer people earn the minimum wage or less now than before the pandemic, according to the ONS (the orange line above).
Is the government doing anything about it? Chancellor Jeremy Hunt described the current inflation rate as “dangerous” in his budget speech earlier this month and committed to bringing it down to sustainable levels. But negotiations over pay and conditions with many public sector unions have yet to be concluded because the government won’t agree to union demands for higher wages.