Both total pay, which includes bonus payments, and regular pay, which excludes bonuses, fell by 0.5% in real terms for employees in Great Britain between April-June 2016 and April-June 2017, according to research by the Office for National Statistics (ONS).
Its UK labour market: August 2017 report, also found that in nominal terms, which have not been adjusted for consumer price inflation, total pay increased by 2.1% between April-June 2016 and April-June 2017. This is higher than the growth rate of 1.9% recorded between March-May 2016 and March-May 2017.
Regular pay, excluding bonuses, in nominal terms increased by 2.1% between April-June 2016 and April-June 2017, compared to 2% between March-May 2016 and March-May 2017.
Average total pay, including bonus payments, for employees in Great Britain was £506 a week in nominal terms before tax and other deductions from pay in June 2017. This compares to £493 a week in June 2016. Average regular pay was £474 a week, compared to £465 a week in June 2016.
In real terms, which have been adjusted for consumer price inflation, average total pay for employees in Great Britain was £490 a week in June 2017, before tax and other deductions from pay. Average regular pay in real terms, excluding bonuses and before tax and other deductions from pay, was £459 a week in June 2017.
Average total pay for employees in Great Britain, in nominal terms, increased by 34.6% between January 2005 and June 2017, rising from £376 a week to £506 a week. Over the same time period, the Consumer Prices Index, including owner occupiers’ housing costs (CPIH), increased by 32.2%.
Ben Brettell, senior economist at Hargreaves Lansdown, said: “Some positive news on the UK’s cost of living squeeze from the ONS today, with average earnings growth beating expectations by growing 2.1% year-on-year in the three months to June. When inflation is taken into account, however, real wages still fell by 0.5% in the three-month period.
“A fundamental shift in the labour market has led this relationship to break down, meaning wages remain depressed despite low unemployment. The cause seems to be a lack of underlying inflationary pressure, combined with technological developments and global competition which has weakened the bargaining power of the worker. Throw continuing lacklustre productivity growth into the mix too, and the Bank of England’s prediction of 3% wage growth by next year could look optimistic.”
Crowley Woodford, employment partner at Ashurst, added: "Given this record employment rate it is surprising, at first glance, that wage growth has not kept pace with inflation. However, employers are still lacking in confidence about the longer-term future and [employees] still feel insecure in their jobs. This dampens the pressure on employers to offer higher pay and employee representative bodies to demand it."
