Total pay falls by 0.7% in real terms

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Total pay for employees in Great Britain, including bonuses, fell by 0.7% in real terms between March-May 2016 and March-May 2017, according to research by the Office for National Statistics (ONS).

Its UK labour market: July 2017 report, also found that regular pay, excluding bonus payments, fell by 0.5% in real terms, which have been adjusted for consumer price inflation, between March-May 2016 and March-May 2017.

In nominal terms, which have not been adjusted for consumer price inflation, total pay increased by 1.8% between March-May 2016 and March-May 2017. This is lower than the growth rate of 2.1% recorded between February-April 2016 and February-April 2017.

Regular pay in nominal terms increased by 2% between the three months to May 2016 and the three months to May 2017. This is higher than the 1.8% growth rate recorded between February-April 2016 and February-April 2017.

Average total pay, including bonuses, was £503 a week in nominal terms before tax and other deductions from pay for employees in Great Britain in May 2017. This compares to £494 a week in May 2016. Average regular pay, excluding bonuses, was £473 a week in May 2017, compared to £463 a week in May 2016.

In real terms, average total pay for employees in Great Britain was £487 a week in May 2017, before tax and other deductions from pay. Average regular pay in real terms, excluding bonuses, was £458 a week in May 2017, before tax and other deductions from pay.

Average total pay for employees in Great Britain, in nominal terms, increased by 33.7% between January 2005 and May 2017, rising from £376 a week to £503 a week. Over the same time period, the Consumer Prices Index, including owner occupiers’ housing costs (CPIH), increased by 32.2%.

Ian Brinkley, acting chief economist at the Chartered Institute for Personnel and Development (CIPD), said: “These figures show a stark contrast in the labour market between some impressive employment growth figures, dominated by a rise in full-time permanent employment, and continued weakness in wages. Although there is a slight improvement in average earnings growth in money terms, pay is still lagging behind prices and as a consequence real wages are still falling.

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“There is little prospect of a sustained recovery in pay over the next year, especially given the very poor productivity figures released earlier this month. The Bank [of England] should therefore give more weight to the prospects for pay and productivity than to the rise in employment, and hold off a further interest rate rise.

“The fall in real wages affecting most people in the labour market is a reminder that the challenges around improving the quality of working lives for most people is much bigger than tackling the gig economy alone, and highlights the need for government to work with employers and unions to tackle the underlying causes of low paid, low quality work.”