Has UK wage growth finally overtaken inflation?
16 May 2018
UK wages grew by 2.9% more in the first quarter of 2018 than the same time 2017, according to the latest figures from the Office for National Statistics (ONS). The improved rate sees wages move ahead of inflation for the first time in 14 months, beating the 2.7% inflation rate in the UK.
The improvement in wages is comparable to the United States, where wage growth is at 2.7% - 0.2% higher than the US inflation rate. The Reuters news agency reported that while this was the biggest was the biggest wage increase since Q2 2015, it still only worked out as a 0.4% pay increase based on inflation, and their report also highlighted the specific criteria of wages – regular vs total.
The wage growth data is specifically improved for regular pay, whereas total wages (including bonuses) were only up by 2.6% year-on-year for the first quarter. This rate is lower than the 2.8% rate for the end of 2017 and lower than UK inflation.
The Guardian reported citing figures showing that British workers are still worse off than before the financial crisis of 2008. Using data from the ONS they pointed out that average regular pay is down £13 per week compared to March 2008, and total pay is down £33 per week compared to February 2008.
Unions came out vocally criticising the government for the poor growth in wages, with the General Secretary of the TUC, Frances O’Grady, saying: "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… Workers deserve a fairer share of the wealth they create.”
The Chancellor of the Exchequer took to Twitter to argue that the wage growth was the start of an economic upturn for the UK:
Wage growth against inflation will continue to be a concern for the British public throughout 2018, but the next threat to the Bank of England’s monetary policies is productivity. The ONS statistics show productivity from January to March was down 0.5% - the largest fall since the end of 2015. The bad weather is potentially why this happened, but a continued decrease would be bad news for the UK economy given the weak 0.1% growth rate reported for Q1 this year.