Wages 'eroded over more than a decade'

Average pay growth rising above inflation in August for the first time in two years will be cold comfort for millions of workers who have suffered pay erosion for over a decade.

The Office for National Statistics (ONS) announced on Thursday (October 17) that in the three months to August, annual pay growth rose by 7.8 per cent, overtaking price rises over the same period for the first time since 2021.

But a deeper look at the statistics shows that pay growth – an average figure – is not a reality for many, if not most, people. The ONS said that rising pay growth was primarily driven by soaring bankers’ pay, with finance and business service workers seeing regular pay excluding bonuses climbing by 9.6 per cent in the three months to August.

There remains a significant pay growth gap between public and private sector workers, with average pay rising for private sector workers by 8 per cent in the three months to August, and for public sector workers by only an average of 6.8 per cent over the same period.

ONS figures also indicate that pay growth may have reached a peak, with average annual pay falling from 7.9 per cent in three months to July to 7.8 per cent in the three months to August. Coupled with a decrease in the number of job vacancies, economists predict wage growth will continue to slow.

That wages are now outstripping inflation in the first place is contested — critics have highlighted that the government and ONS use the CPI measure of inflation, which is often lower and doesn’t include housing costs. Unite uses the real RPI measure of inflation, which the union believes is more accurate and now stands at 9.1 per cent.

Using the RPI measure of inflation, most workers’ pay is still failing to keep up with price rises. And looking at long-term trends, as the TUC highlighted, if pay kept growing in line with pre-financial crisis levels, workers would be on average nearly £15,000 better off today.

Commenting on the latest pay data from the ONS, Unite general secretary Sharon Graham said, “The real value of wages has been eroded over more than a decade. Data suggesting pay rises have finally caught up with corrosive inflation will give hard-working families some small respite from the damage that has been wrought on household incomes by years of economic incompetence and mismanagement.

“If boardrooms toughen their stance towards the workforce, Unite will continue to fight for fair pay to win out over corporate profiteering,” she added.

By Hajera Blagg