UK’s richest 1% of earners are only group not to see real pay cut

File photo dated 11/08/14 of office workers in central London. The ongoing skills shortage, fewer foreign workers and greater hesitancy among some people to apply for new jobs has led to a marked drop in the number of candidates for vacancies, according to recruiters. Issue date: Friday August 5, 2022.
Soaring inflation is eating into the real terms wages of UK workers. (PA) (PA)

The richest 1% of earners are the only workers who have not seen a real terms cut to their pay in the last year, official figures show.

New figures released by the Office for National Statistics (ONS) on Tuesday revealed a record fall in real pay as wages failed to keep up with soaring inflation.

Regular pay, excluding bonuses, grew by 4.7% in the three months to June, while inflation soared to 9.4% in the year to June.

In analysis by the Institute for Fiscal Studies (IFS) that lays bare the unequal impact of the cost of living crisis, the top 1% of earners saw their monthly pay keep up with inflation – the only group to do so.

In contrast, the bottom 10% saw a 3% drop in real terms income.

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Change in real monthly pay since October 2021. (IFS)

Nye Cominetti, a senior economist at the Resolution Foundation, has warned of biggest pay squeeze in the UK since 1977.

"The scale of this pay pain is even deeper than official figures suggest too, as pay growth estimates are still artificially boosted by the effects of the furlough scheme last year," said Cominetti.

“This squeeze has come about despite robust pay growth and a lively jobs market, with pay settlements strengthening slightly, and almost a million people moving jobs in the last three months."

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In the aftermath of the ONS data, Labour leader Sir Keir Starmer said falling pay and the rising cost of living was placing “further pressure on so many families”.

“This wage stagnation has been going on for 10 years,” Starmer said during a visit to the Nationwide Building Society headquarters in Swindon.

Annual change in inflation-adjusted pay. See story ECONOMY Unemployment. Infographic PA Graphics. An editable version of this graphic is available if required. Please contact
Annual change in inflation-adjusted pay. (PA via ONS) (Press Association Images)

“So I really understand just how people are struggling, and it’s one of the reasons that we announced our energy price freeze yesterday - to keep those bills down and to make the choice that the oil and gas companies in the North Sea should pay a windfall tax to help people who are struggling through this winter period.

“It’s further evidence, I think, of the pressure that so many millions of people are under.”

However, in response to the latest labour market figures, chancellor Nadhim Zahawi said: “Today’s stats demonstrate that the jobs market is in a strong position, with unemployment lower than at almost any point in the past 40 years – good news in what I know are difficult times for people.

“This highlights the resilience of the UK economy and the fantastic businesses who are creating new jobs across the country.”