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16 Jul 2014

Employment up – but so are prices, as wage growth slows

UK employment is on the rise – but so are prices. And the growth of wages is continuing to slow. Are we in the middle of a massive #payfail? Here’s the three things you need to know.

Video: Economics Editor Paul Mason explains all

Employment

First the good news: the number of people in work has risen again, and is up 254,000 over the last three months.

Overall, just 6.5 per cent of the working age population are not in work – that is the lowest in six years, and was trumpeted by David Cameron on Wednesday as proof that his government’s economic plan is bearing fruit.

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Pay

But that is not the whole story. While more people are in work, the growth of wages is slowing down – at the same time as the cost of living is rising.This means the gap between wages and prices is widening.

The graph below shows that the average wage for March to May this year has only grown 0.3 per cent compared to the same period last year – or 0.7 per cent including bonuses. This puts average weekly wages at £478 including bonuses, or £449 without a bonus.

The 0.3 per cent growth is the lowest increase since the height of the financial crisis in 2009. While the figure that includes bonuses – 0.7 per cent – is the lowest since records began in 2001.

Prices

Meanwhile figures released on Tuesday showed that inflation (CPI) – or prices – has risen to 1.9 per cent in June.

What does this all mean? Essentially, a real terms pay cut for many workers, who can’t buy as much for their buck.


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