Wage growth lags inflation

Date : 17 June 2022

The ONS has revealed that real pay levels over April fell due to the impact of rising inflation.

The average weekly wage is rising, total pay (including bonuses) is up 6.8% and regular pay is up 4.2% over the year to April 2022.

Adjusting for the impact of CPI inflation, workers have seen a growth in total pay (including bonuses) of 0.4%, while regular pay fell by 2.2%

Click chart to enlarge

However, the chart above reveals that adjusting for the impact of RPI inflation, the broadest measure of household inflation, workers are 2.2% worse off than a year ago in terms of total pay while regular pay fell by 5.2%. Given that bonuses tend to benefit higher earners, this is a severe wage contraction for lower and middle income households.

Tracking the total pay of workers against the RPI measure shows that wages have fallen back against the inflationary pressure in April, which hit 11.1% on the RPI measure. There was a slight respite for households in March 2022, due to strong bonus growth.

Earlier this year, the Office for Budget Responsibility forecast that real incomes would fall by 2.2% over 2022, the largest fall since records began. This is based on the CPI measure of inflation and so may not fully capture the experiences households are feeling.

Food price inflation is a key contributor to current levels of inflation. In our latest Viewpoint Special: Exploring the outlook for food inflation, we reveal our forecasts for food price inflation and how consumers will react.

We expect the mood of consumers to remain bleak for the foreseeable future as they are impacted by rising inflation and a decline in real wages.

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