MILLIONS of workers are facing a cut to pay as inflation eats into household earnings, while the unemployment rate rises.
New figures released today by the Office for National Statistics (ONS) show that regular pay in real terms fell by 2.6%.
GettyMillions of workers hit by pay cut as real wages fall 2.6% and unemployment rises[/caption]
The rate of UK unemployment rose to 3.7% in the three months to November, up from 3.5% in the previous three-month period, the ONS said.
It comes as the UK’s rate of inflation fell to 10.7% in November, after hitting a 41-year high in the previous month.
Prices are rising at a faster rate than pay, which means people’s incomes are squeezed.
Growth in average total pay (including bonuses) and regular pay (excluding bonuses) among employees was the same at 6.4%
For regular pay this is the strongest growth seen outside of the coronavirus pandemic, the ONS said.
But, when adjusted for inflation over the year, total and regular pay both fell by 2.6%.
It’s a pay cut in real terms as wages are going up, and they don’t match the rate of inflation – which means people are effectively worse off.
Meanwhile, there were 1.161 million job vacancies on average across October to December 2022.
The ONS said that in the latest period the number of people out of work for up to six months rose, driven by 16 to 24-year-olds.
ONS director of economic statistics Darren Morgan said: “In the most recent three months, employment levels were largely unchanged on the previous three months.
“Unemployment rose, driven by more young people who have only recently become unemployed, overall there was a small increase in people actively engaged in the jobs market, whether working or looking for work.
“Vacancies fell again, though remaining at very high levels, with the number of people looking for work broadly in line with the number of jobs being advertised.
“The real value of people’s pay continues to fall, with prices still rising faster than earnings.
“This remains amongst the fastest drops in regular pay since records began.”
It comes as thousands of workers have gone on strike in recent months over pay.
Many are calling for for higher increases to keep up with skyrocketing prices of everyday items.
Royal Mail staff as well as train workers and nurses are among those who have announced walk-outs.
The ONS said that there were 467,000 working days lost because of labour disputes in November 2022.
This is the highest number since November 2011.
It follows official data last week revealing the economy unexpectedly grew by 0.1% in the month to November.
However, the ONS said that in the three months to November, gross domestic product (GDP) fell by 0.3%.
Alice Haine, Personal Finance Analyst at Bestinvest, said: “While the economy grew by a surprise 0.1% in November, raising hopes that the dreaded recession might be avoided, the double hit of persistently high inflation and rising
interest rates will take their toll on households and businesses at some point meaning a downturn is still very likely – albeit a shallower one that starts a little later than expected.”
What it means for your money
The main concern when workers see a “real terms” fall in their salary, is that their pay is not keeping pace with the cost of living.
Wage growth is still way behind inflation as prices of everything from groceries to energy bills are going up at a much faster rate.
But a tight labour market could means it’s a good time to find a new job or ask for a pay rise.
It is likely you’ll still feel the pinch though as the cost of living crisis continues.
Energy prices, fuel and food are are among the essentials which have rocketed.
It means many are struggling to keep up, or have already fallen behind, on bills.
What help can I get if I’m struggling?
Millions of households started receiving a £400 energy bill discount from October 1.
Households will have already received a £66 energy bill discount in October, November and £67 in December.
There will also be a payment worth £67 in January, February and March.
Between November and March 2023, a £300 one-off “Pensioner Cost of Living Payment” started being paid out to eight million households.
It is being given to those who already get the winter fuel payment – which is worth between £100 and £300 for those over state pension age.
Millions of households have also started to get the £150 Warm Home Discount between December and March 2023.
Check out more energy bill help you can claim worth as much as £3,435 a year.