Wage Growth Finally Beating Inflation, ONS Reports
According to a report by the Office for National Statistics (ONS), between Q4 of 2017 and Q1 of 2018 a series of positive changes were seen in the UK’s labour market.
The Labour Force Survey, as the report was called, showed rise in average wages of 2.9% over the course of the quarter – beating inflation for the first time in a year. Additionally, the number of people in work increased, and correspondingly the number of unemployed, whether not seeking, unavailable to work, or economically inactive, decreased.
In real terms, the 2.9% increase in weekly earnings corresponds to a real-world gain of 0.4% once inflation is taken into account.
Overall, 197,000 more people were employed in the first quarter of 2018 than in the last of 2017, and 396,000 than in the first quarter of 2017. This leads to a current total workforce of 32.34 million people. The overall unemployment figure is down to 1.42 million, signifying a joblessness rate of 4.2%, the lowest figure since 1975.
The Chancellor, Philip Hammond, attributed the positive improvements to government policy, saying: “Growth in real wages means that people are starting to feel the benefit of more money in their pockets; another turning point as we build a stronger, fairer economy. The unemployment rate is at its lowest in over 40 years and with our National Living Wage we are making sure that the lowest-paid feel the benefit with an extra £2,000 a year.”
However, Frances O’Grady, the general secretary of the Trades Union Congress (TUC), said in return: “Working people are still not getting a fair deal. Millions of jobs do not pay a real living wage. And average weekly pay is still worth much less than a decade ago.”
The TUC had earlier pointed out that overall the picture was not particularly rosy, with the UK in the grip of the longest wage slump (eight years) since the Napoleonic Wars of the early 19th Century.
Analysts have generally been cautious about the extent of the figures either way, noting that although the improvement is certainly positive, there is still a long way to go. Kamal Ahmed, BBC economics editor, said: “Weak incomes have been a problem for a decade. It will need a longer period of wages rising above the rate of inflation for people to feel significantly better off. And, for the public sector, the 1% cap on wage rises is only just being released. Many millions of people still have incomes below where they were a decade ago. The financial crisis, poor economic performance and major changes in public sector financing have cast a very long shadow.”
If jobs growth and wage rises continue to occur over the course of the summer, there is a very real prospect of an increase in interest rates from the Bank of England in August, initially scheduled to happen early in 2018, until weaker than expected performances in the early months of the year.