Saturday, June 25, 2022

UK wages fall sharply as profits fail to keep pace with rising inflation

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Official figures show that workers’ wages have continued to fall behind skyrocketing inflation

The Office for National Statistics (ONS) laid bare the depth of the deepening cost-of-living crisis, revealing that regular wages excluding bonuses fell 2.9 percent in March, adjusting for consumer price index (CPI) inflation — the largest drop since November 2011.

UK wages suffered a sharp fall between January and March, but unemployment has fallen to its lowest level in almost 50 years.

The ONS said profits fell 1.2 percent after adjusting for inflation, the biggest drop since 2013.

But the unemployment rate fell to 3.7 percent in the three months to March – the lowest level since October-December 1974 – meaning there were fewer unemployed than job vacancies for the first time. The drop was also due to an increase in the number of people exiting the labor market, the figures showed.

In the three months to February, real regular compensation was 2 percent lower, the sharpest drop since 2013, despite a further increase — 4.2 percent — in average regular compensation for the quarter.

Salaries including bonuses rose 7 percent and rose 9.9 percent in March as companies increased rewards for their employees amid a booming job market.

But the ONS said regular earnings are “falling precipitously” in real terms.

The tightness is likely to worsen as the Bank of England has forecast inflation could rise into double digits later this year.

Darren Morgan, director of economic statistics at the Office for National Statistics, said: “Continued strong premiums in some sectors such as construction and particularly finance mean that overall wages continue to grow faster than prices on average, but underlying regular earnings are now declining strong in real terms.”

The latest ONS jobs data confirmed an increase in the number of employed workers in the UK, by 121,000 between March and April to 29.5 million. Overall employment remains lower than before the pandemic, the ONS said.

Mr Morgan said the data showed a “mixed picture for the labor market”. He added: “Overall employment, while up quarter-on-quarter, remains below pre-pandemic levels.

“Since the beginning of the pandemic, around half a million more people have completely withdrawn from the labor market.”

He added: “In fact, with the recent drop in unemployment to its lowest level since 1974, for the first time on record, there were actually fewer unemployed than vacant positions.”

Labor Secretary Mims Davies MP said it was “fantastic to see over a million people with disabilities working more than five years ago”.

“Our domestic labor market is recovering well, the number of employees is increasing again and the number of vacancies remains high,” she said.

“However, we are fully aware of the impact that global inflationary pressures are having on the cost of living for families, which is why we are taking steps to help those on low incomes. Our job coaches help people into work in our job centers every day – those who take up full-time work could be £6000 better off than with welfare payments.

“That’s why we launched the Way to Work campaign to get half a million more people into work, with over 280,000 starting a job in the first three months of the campaign.”

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