Real wages, which take into account inflation, have fallen at their sharpest rate in 14 years in Britain, according to figures from the Office for National Statistics.
Growth in basic pay, which the Bank of England pays particular interest to when considering decisions on interest rates, lost pace in the three months to January, the ONS figures published on Tuesday showed.
Regular pay, which excludes bonuses, rose by 6.5 per cent, compared with 6.7 per cent in the three months to December.
Total pay, which includes bonuses, grew by an annual 5.7 per cent in the November-to-January period.
However, in real terms — adjusted for inflation — growth in total and regular pay fell on the year in November 2022 to January 2023. The decline was by 3.2 per cent for total pay and 2.4 per cent for regular pay.
There was a larger fall in total real wages between February to April 2009, but today's figures are still among the largest declines in growth since comparable records began in 2001, the ONS said.
The slide in real pay will be at forefront of those listening to UK Chancellor Jeremy Hunt's Budget speech on Wednesday to see if there are any measures that could relieve Britain's embattled households.
“There is no case to introduce yet further punitive sanctions into the welfare system, which will be both costly and inefficient for workers and businesses alike and is guaranteed to increase anxiety for some of the most vulnerable households in the country,” said Ben Harrison, director of the Work Foundation at Lancaster University.
“Instead, the government should prioritise cancelling the energy price guarantee to provide further support for low-income households.”
Economic inactivity
Meanwhile, tentative signs that Britain's tight labour market might be starting to ease were evident in the latest figures released by the ONS.
While the rate of unemployment remain unchanged in the three months to January at 3.7 per cent, the estimated number of vacancies between December 2022 and February 2023 fell by 51,000 on the quarter to about 1.12 million.
“Vacancies fell on the quarter for the eighth consecutive period and reflect uncertainty across industries, as survey respondents continue to cite economic pressures as a factor in holding back on recruitment,” the ONS said.
The economic inactivity rate, which measures the number of people not in work and not looking for work, fell by 0.2 per cent on the quarter, to 21.3 per cent in November 2022 to January 2023.
This fall in economic inactivity during the latest three-month period was largely driven by people between the ages of 16 and 24 years, the ONS said.
That does not bode well for Chancellor Jeremy Hunt, who is aiming to convince early retirees aged 50 and above to rejoin the workforce. He could well announce incentives for them to do so in his budget speech on Wednesday.
“Mooted changes include raising the annual and lifetime pension allowances of £40,000 gross and £1.073 million respectively, to either retain older workers in the workforce or attract them back in,” said Alice Haine, personal finance analyst at Bestinvest.
“The LTA limit has caused challenges for many professionals who were either nearing the limit or had already maxed it out and did not want to risk breaching it and incurring a tax charge.”
“Too many other people, including parents and the over-50s, still face barriers in returning to work,” said Eugenia Migliori, the Confederation of British Industry head of employment and inclusion.
“The Chancellor can remove these by increasing funding and expanding childcare provision, investing in technology and new ways of working to boost productivity and reforming the Apprenticeship Levy.”
Budget on Wednesday
Reacting to the labour market figures, Mr Hunt repeated his principal goal of bringing down inflation.
“To help people's wages go further, we need to stick to our plan to halve inflation this year,” he said.
“At the budget, I will set out how we will go further to bear down on inflation, reduce debt and grow the economy, including by helping more people back into work.”
Meanwhile, Jonathan Ashworth, the opposition Labour Party's shadow work and pensions secretary, said: “The Tories' abject failure to support people back to work means there are 234,000 fewer people in employment than before the pandemic.
“While other major economies have bounced back, Britain is languishing under the Tories, and families are paying the price.”
