Wages go down as well as up

Thursday, November 23, 2017

According to figures from the Office of National Statistics (ONS) average weekly earnings for full time employees in the UK at April 2017 rose by 2.2% compared to the equivalent 2016 period. This puts average weekly earnings at £550, up from £539.

In order to understand these changes more fully it is useful to set them in context of inflation.

 

The chart shown here (ONS, Annual survey of hours & earnings, 2017) provides a graphic illustration of the real value of weekly wages when compared to prices over a period of years back to 2005.

The yellow line represents the relative 'buying power' of the average wage at 2017 prices and, it can be seen, that we have actually gone backwards since the heady days of 2008, before the global economic crash, and are roughly at the level of 2011, meaning that wages have risen at roughly the same rate as inflation over that period.

Moreover, this analysis also tells us that weekly earnings have actuallydecreased by 0.4% in the year to April 2017 in real terms, representing the first fall since 2014 and reflects a higher level of inflation (at 2.6%).

Ignoring the adjustment for inflation, it is the lowest paid workers that have experienced the highest rise in pay with earnings up by 3.5% for full time workers in the lowest percentile. It is hoped that the impact of the 'living wage' is helping in this regard but it may also be indicative of the relative scarcity of so-called unskilled workers across all sectors.

There was also encouraging news regarding pay differentials between men and women in the workplace as the gender pay gap fell to 9.1%, the lowest since the survey began in 1997. We do, however, find ourselves asking when, if ever, this startling inequality will ever be fully addressed. Answers on a postcard please.