Real pay continues to fall despite labour market tightening

Official figures show another drop in unemployment as experts caution the pay squeeze is likely to affect some groups more than others

Credit: Tempura/elCasanelles/Getty Images

Real pay continues to decrease despite another drop in unemployment, official figures have shown.

The latest Labour Force Survey from the Office for National Statistics (ONS), released today (14 June), found that growth in UK employees' average total pay including bonuses reached 6.8 per cent in the period February to April 2022, while growth in regular pay (excluding bonuses) reached 4.2 per cent .

However, adjusted for inflation, pay including bonuses grew just 0.4 per cent, with regular pay falling 2.2 per cent.

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Despite some of the highest nominal pay rises in recent history, Jonathan Boys, labour market economist for the CIPD, said inflation was eroding these gains, and disproportionately affecting some workers more than others.

“Whether pay is beating inflation – resulting in a real pay rise – depends on who you are, and often whether you are paid a bonus or not. Total pay in the private sector rose by 8 per cent compared to just 1.5 per cent in the public sector,” he said.

Echoing this, Joanne Frew, global deputy head of employment and pensions at DWF, said with retention and recruitment difficulties continuing, employers are having to think of new and innovative ways to attract the best talent beyond the traditional route of increasing pay.

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But, she said: "With the cost of living crisis, employees quite simply need more money to live, making a competitive pay package crucial.”

Today’s figures also showed the UK’s employment rate for February to April increased by 0.2 percentage points on the previous quarter, reaching 75.6 per cent. However, this is still below pre-pandemic levels.

Similarly, while the total actual weekly hours worked increased from the previous quarter by 12.2 million hours to 1.04 billion hours in February to April 2022, the figures still remain 7.6 million below pre-pandemic levels.

The latest estimate of payrolled employees for May 2022 also showed a monthly increase to a record 29.6 million: up 90,000 on the previous month. This was driven by growth in the number of full-time employees to a record high, but was partially offset by a decrease in the number of part-time employees.

At the same time, the unemployment rate for February to April 2022 fell by 0.2 percentage points on the previous quarter to 3.8 per cent, and the number of vacancies rose to a new record of 1.3 million.

Amid the widespread shortage of people to roles, Tania Bowers, global public policy director at the Association of Professional Staffing Companies (APSCo), called for more government action. “There’s a lot that can be implemented to alleviate some of the pressure on the labour market at this critical time,” she said, including improving access to international labour markets.

Neil Carberry, chief executive of the Recruitment and Employment Confederation (REC), also called for an immigration system that was “flexible enough to address the really sharp shortages” seen by some sectors.

“We have to improve our activation programmes to help Job Centres get people into work quickly and radically reform the skills system to help fill some of the gaps.”