MILLIONS of Brits are facing a cut to pay in real terms as inflation is outpacing wage growth.
Official data published today by the Office for National Statistics (ONS) shows pay increased by 4.2% in the three months to April, excluding bonuses.
But inflation is running at 9% and could go even higher piling pressure on people’s finances.
It means in real terms it’s a pay cut, with wages down 2.2% on last year the ONS said.
Sam Beckett, head of economic statistics at the ONS said: “The high level of bonuses continues to cushion the effects of rising prices on total earnings for some workers, but if you exclude bonuses, pay in real terms is falling at its fastest rate in over a decade.”
Last month figures from the ONS showed the average salary went up by 4.2% when inflation was at 7%.
The latest wage data also reveals unemployment is at it’s lowest for nearly 50 years, and job vacancies hit a record 1.3million.
Beckett said: “Today’s figures continue to show a mixed picture for the labour market.
“While the number of people in employment is up again in the three months to April, the figure remains below pre-pandemic levels.
“Moreover, although the number of people neither in work nor looking for a job has fallen slightly in the latest period, that remains well up on where it was before Covid-19 struck.
“At the same time, unemployment is close to a 50-year low point and there was a record low number of redundancies.
“Job vacancies are still slowly rising, too. At a new record level of 1.3 million, this is over half a million more than before the onset of the pandemic.”
A tight labour market where employment is high and there are lots of job vacancies means it’s a good time to find a new job.
And in some areas a lack of staff has pushed up wages, with some jobs like chefs and bouncers seeing above inflation wage rises.
From next month hundreds of thousands of workers will get a boost to pay from a change to National Insurance.
The threshold that workers pay National Insurance will rise from £9.500 a year to £12,500 from July.
It means the average worker will get £30 a month or £360 extra a year.
The amount you’ll get will vary based on how much you earn.
It’s one of several ways the government is attempting to help millions of households struggling with the cost of living crisis.
Energy prices, fuel and food are among the essentials which have rocketed.
The government last month set out plans for extra one-off cost of living payments including £650 for those on means-tested benefits, £400 for energy billpayers and £300 more for pensioners.
Chancellor Rishi Sunak said: “Today’s stats show our jobs market remains robust with redundancies at an all time low.
“Helping people into work is the best way to support families in the long term, and we are continuing to support people into new and better jobs.
“We are also providing immediate help with rising prices – eight million of the most vulnerable families will receive at least £1,200 of direct payments this year, with all families receiving £400.”
The latest wage figures follow fresh fears of a recession after data yesterday showed the economy shrank by 0.3% in April.
This week the Bank of England is set to announce another hike to interest rates in an attempt to keep inflation down, which the central bank last month said could hit 10% this year.
Alice Haine, personal finance expert at Bestinvest, said that while average wages are rising and “might feel like a bumper salary increase” households will feel the pinch as inflation is at a 40 year high.
She said: “It means the spending power of households is now severely compromised and with inflation expected to surge to 10% or higher in the fourth quarter – when Ofgem’s energy price cap increases to £2,800 – the situation will only get worse.
“For households grappling with higher food, fuel and energy bills along with the rise in the National Insurance tax, asking for a pay rise now may not be enough to ease the strain of the cost-of-living crunch.
“This may encourage some to hunt out new roles with more lucrative rewards, but while job vacancies in the three months to May rose to a new record of 1.3 million, the rate of growth slowed.
“Employers, already struggling to fill vacancies, are still under pressure to increase pay to either keep their existing workforce happy or to attract new staff, raising the spectre of a wage/price spiral that could send inflation rates even higher in the months ahead.”
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