UK wages jump but cannot reach inflation
Updated: Feb 1
By the end of 2022, UK wages had climbed at the fastest rate outside of the epidemic
period. They are still unable to keep up with the price increases, though. Wages are the
amount that is compensated to labour for its contribution to the production process in
economics. Real wages are an indicator of how living standards have changed since they
reflect the value of salaries that have been inflation-adjusted. Nominal wages minus
inflation equal real wages. Living standards are not solely determined by real wages. For
instance, if tax rates increased, the amount of disposable income would decrease.
Additionally, if living expenses increased (such as those for housing, transportation, and
heating), this would limit our discretionary income (amount left over to spend after meeting
essential living costs).
The greatest increase in wages since records have been kept began in 2001, with a 6.4%
increase from the same time a year earlier. Although wages are rising, employees are still
making less money. Real earnings decreased by about 4.0% as a result of salary not keeping
up with the rising cost of commodities.
According to the Office for National Statistics, private sector earnings increased 7.2%
annually in the three months to November, which was more than double the 3.3% increase
in the public sector (ONS).
Workers have started to request pay increases as a result, but some businesses, especially small ones, find it challenging to raise wages in step with inflation while also having to pay for rising energy costs.
Despite fears that the UK economy is stagnating, the employment rate in the UK has remained largely unchanged, while the unemployment rate has increased marginally. Furthermore, due to a labour shortage and a high number of available vacancies, companies have offered more attractive pay packages, with the number of vacancies remaining at historically high levels.
References/ Further Reading:
https://www.bbc.co.uk/news/business-64290162