The Office for National Statistics has said that although wages rose between October and December 2021, soaring inflation meant that pay fell 0.8 per cent in real terms compared to the previous year.
ONS figures show that standard employee salaries without bonuses grew by 3.7 per cent between October and December 2021 compared to the same period in 2020, but real terms pay was offset by 5.4 per cent inflation in the 12 months to December 2021.
The Bank of England has indicated that inflation is only set to increase and will exceed seven per cent in 2022.
In response, Bank made the move of raising interest rates to 0.5 per cent earlier in February, and experts expect further increases over the course of 2022 and into 2023 to try to curb inflation, given the current economic landscape.
Unemployment receded to 4.1 per cent according to the latest ONS data, but job vacancies are at a record level of 1.3 million, which is likely to push salaries up as businesses in multiple sectors face struggles to recruit and are being hit by labour shortages.
Indeed, for workers on payroll in January 2022, median monthly salaries increased by 6.3 per cent compared to January 2021 and 10.3 per cent compared to February 2020.
The ONS said that in industries such as science, finance, information and communication and the hospitality industry, wage increases for workers on payroll were rising ahead of inflation.
The Confederation of British Industry’s director for people and skills, Matthew Percival, said that it was a positive that the UK economy was continuing to generate jobs, but warned that recruitment struggles and pay lagging behind inflation in many sectors posed a problem.
In a further effort to stave off inflation, Bank of England governor Andrew Bailey called on workers not to ask for pay increases earlier this year, which drew criticism.
Bailey suggested that “moderation of wage rises” would be necessary to prevent spiralling inflation, but the government distanced itself from his comments and the GMB trade union branded it a “sick joke” to ask working people to remain on stagnant salaries as the cost-of-living rises.
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