‘Pay cut for millions’ as wages fall at fastest pace on record & sign of MORE pain to come

‘Pay cut for millions’ as wages fall at fastest pace on record & sign of MORE pain to come

The latest Office for National Statistics (ONS) figures show that real pay, including bonuses, dropped by 2.5 percent between April and June. As well as this, regular pay, excluding bonuses, fell by three percent which represents a record drop in real regular pay. Before inflation, total pay (including bonuses) was up 5.1 percent in the year to April-June and regular pay rose by 4.7 percent.

Kevin Brown savings specialist at Scottish Friendly commented: “With the country gripped by unprecedented price rises, one of the sure-fire ways for families to keep pace is through pay rises.

“Unfortunately, that isn’t happening. The ONS figures show regular pay fell by three percent – factoring in current inflation figures – which means households are experiencing the biggest net fall in earnings power on record.

“This will likely be made even worse by rising inflation numbers tomorrow.”

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “We’re facing wage woes today and a joyless jobs market for tomorrow.

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“There was another record plunge in real wages, as employers struggled to keep up with runaway inflation.

“Meanwhile, early weakness in the jobs market could be a sign of even more pain to come. We’re all going to be worse off, so we need to make plans.”

Kate Smith, the head of pensions at Aegon, warned that these figures signal a “pay cut for millions” across the country.

Ms Smith explained: “On the eve of inflation predicted to reach double figures, this morning’s ONS figures paint a gloomy picture with a record fall in real regular pay as wages simply fail to keep pace with soaring inflation, with the gap now at 4.7 percent.

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“In the middle of an ever tightening cost of living of crisis, this means a pay cut for millions of workers as households are forced to walk a financial tightrope with everyday essentials such as food and fuel rising exponentially in cost.

“This will undoubtedly force many working-age individuals into a corner as they are forced to make difficult day-to-day decisions about how to stretch their finances to cover everyday expenses.”

Currently, inflation in the UK is at 9.4 percent and is expected to exceed 13 percent in the coming months.

Overall, pay in the public sector increased by only 1.8 percent despite the UK’s inflation rate soaring way above this.

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As a result of these figures, the unemployment rate in the UK jumped slightly while the employment rate fell back.

Tomorrow (August 17), the UK’s inflation rate is forecast to reach double figures which will further exacerbate the cost of living crisis.

In a bid to mitigate the damage caused by price hikes, the Bank of England recently raised the base rate to 1.75 percent.

With these latest wage figures, Thomas Pugh, an economist at RSM UK, believes another rate increase is likely.

Mr Pugh said: ‘The leap in regular pay growth to 4.7 percent in June, which is miles above the three to 3.5 percent that’s consistent with the two percent inflation target, significantly raises the chances that the Monetary Policy Committee (MPC) will go for a second 50 basis point rise in interest rates in September.”

On the figures, DWP Minister Julie Marson said: “Today’s figures show that the jobs market remains resilient with more people on payrolls and unemployment remaining at a near record low, despite the challenging economic circumstances we face.

“We recognise people are struggling with rising prices and our work coaches stand ready to provide practical help for people to increase their earnings even after they’ve secured a job.

“Being in stable employment is one of the best ways for people to get on, but we’re also providing £1,200 direct payments for millions of low income households as part of our £37billion package of support to help with the cost of living.”

Published at Tue, 16 Aug 2022 07:39:00 +0000