Financial News

  • 14 August 2014, 12:04

Wages Fall For First Time In Five Years

British workers earned less between April and June than they did in the same period last year, deepening the cost of living squeeze.

The Office for National Statistics (ONS) charted average weekly earnings, including bonuses, fell by a yearly 0.2% over the three months.

The change marks the first time wage growth has been negative since the recession of 2009.

When the effects of bonus payments were stripped out, pay rises remained weak and still well below the 1.9% rate of CPI inflation.

It showed growth at an annual rate of just 0.6% between April and June - the lowest growth in regular pay since records began in 2001.

Commenting on the negative earnings figure, the ONS said it continued to reflect a cut in income tax in April 2013, which prompted many firms to delay bonus payments.

In its quarterly inflation report, the Bank of England halved its forecast for wage growth in 2014, from 2.5% to a below-inflation 1.25%.

The Bank has in the past cited weak wage growth as a reason for keeping interest rates at their historic low of 0.5%.

Secretary of State for Work and Pensions Iain Duncan Smith, speaking to Sky News, blamed the fall in wage growth on bonuses in the financial sector and pointed to wage rises of over 1% in sectors such as manufacturing and retail.

Adam Corlett, economic analyst at the Resolution Foundation, said that unless there is an unprecedented surge in wages over the next six months it will be "almost impossible for average real pay in 2014 as a whole to exceed last year's".

The ONS also published data on the unemployment rate over the same period. It fell as expected to 6.4%, down from 6.5% a year earlier.

Between April and June, there were 30.6 million people in work, 167,000 more than for January to March and 820,000 more than a year earlier.

There were 2.08 million unemployed people, 132,000 fewer than for January to March 2014 and 437,000 fewer than a year earlier.

Mr Duncan Smith welcomed the fall in unemployment and told Sky News the youth unemployment rate had fallen at its fastest rate for 30 years.

Shadow Employment Minister Stephen Timms instead said: "While today's fall in overall unemployment is welcome, it's extremely worrying that the figures have shown pay falling far behind inflation, and the change in regular pay being the lowest ever on record".

In a separate report, the ONS also said that there were 153,000 Romanians and Bulgarians employed in the UK between April and June, an increase of 13,000 from 140,000 in the previous three months.

Advertisement