Think tank give stark prediction about how a pay rise slowdown could get worse over the next five years
The average worker is just £3.80 a week better off than a year ago, analysis has revealed.
A spike in living costs has all-but wiped out any benefit from rising wages, think tank the Resolution Foundation has revealed.
It came as official figures showed Britain’s jobless rate has risen to the highest level outside of the Covid pandemic since 2016. The Office for National Statistics said unemployment rose to 5.1% in the three months to October, from 5% in September.
It follows reports that employers held back on hiring staff ahead of last month’s Budget. Critics also say a national insurance hike also dented demand for workers.
However, a fall in vacancies has all but levelled off, giving hope that firms are ready to start taking on staff again. And while wage growth has slowed, average pay packets are still just about outstripping the cost of living.
Wages in real terms – after taking account of inflation – rose by just 0.5% in the three months to October, the ONS said. The Resolution Foundation says that, over the past 12 months, average weekly earnings have risen by just £3.80 in real terms, or “barely enough to cover the cost of a cup of coffee”, it added.
Millions of workers are still paying the price of the 2008 financial crisis, it went on, was a decade and a half of wage stagnation. “Inflation outpaced nominal wage growth between 2008 and 2014,” it said.
“And even when real wage growth resumed, it was sluggish – with real growth stalling in the aftermath of the Brexit vote and disrupted by the Covid-19 pandemic. Over the last year, wage growth has once again ground to a near halt – and the latest OBR (Office for Budget Responsibility) forecasts suggest that this stagnation is set to continue, with wages set to grow by a paltry 2% in total between now and 2031.”
Wage growth – before factoring in inflation – slowed to 4.6% in the three months to October, the ONS said. Experts said the easing back in pay increases will reinforce the case for the Bank of England to cut interest rates when it decides on Thursday.
The latest figures estimated the number of employees on payrolls plunged by 38,000 – the biggest fall for five years – during November to 30.3million in further evidence of a weakened jobs market.
The ONS also said younger workers were struggling in the difficult hiring climate, with an 85,000 increase in those unemployed aged between 18 to 24 in the three months to October – the biggest rise since November 2022.
Liz McKeown, ONS director of economic statistics, said: “The overall picture continues to be of a weakening labour market. The number of employees on payroll has fallen again, reflecting subdued hiring activity, while firms told us there were fewer jobs in the latest period.
“This weakness is also reflected in an increase in the unemployment rate while vacancies remained broadly flat. The fall in payroll numbers and increase in unemployment has been seen particularly among some younger age groups.”
TUC General Secretary Paul Nowak said: “When the economy starts to recover, the jobs market will follow – and it is welcome that vacancies now look to have stabilised. But with unemployment rising and real wage growth slowing, the priority must be boosting demand.
“This week, the Bank of England needs to support the economy with a further interest rate cut – making it easier for firms to invest and households to spend.
“And with the effects of the recent economic slowdown continuing to feed into the labour market, it is vital that those who are out of work get the help they need.”
