Real term total pay fell by 0.9% and real term regular pay fell by a record 2.8% over the last year, according to the latest figures from the Office of National Statistics (ONS).
Inflation is currently at a 40-year high of 9.1% and set to climb to 11% by October this year, placing UK consumers under the heel of a crushing cost of living crisis.
“Wages are rising, but prices are rising much faster, resulting in a record 2.8% fall in regular pay in real terms,” said AJ Bell head of investment analysis Laith Khalaf.
“With inflation set to rise even further from here, there looks to be little prospect of the salary squeeze abating any time soon, leaving household finances firmly under the cosh.”
Employees saw an average total pay growth (including bonuses) between March to May 2022 of 6.2% and a rise in regular pay (excluding bonuses) of 4.2%.
“The divergence between public and private sector pay also provides some context for the industrial action we are beginning to see emerge in certain sectors,” said Khalaf.
“Growth in total pay, including bonuses, was 6.2% on average across the entire UK workforce. But there is a stark comparison between private sector wages, which rose by 7.2%, and public sector pay, which went up just 1.5%.”
The ONS reported a 0.4% increase in employment to 75.9% over Q2, however the figure is still below pre-Covid levels, while unemployment and economic inactivity levels declined.
The number of full-time workers rose to a record high across the last three months, alongside a climb in part time employees, reflecting a recovery from the fall in employment over the pandemic.
Payrolled employees increased 31,000 in June compared to revised May figures to a record number of 29.6 million.
Meanwhile, the unemployment rate over Q2 fell by 0.1% to 3.8%. However the number of workers unemployed for up to six months grew over the term at the fastest rate since late 2020.
The number of job vacancies between April and June rose to 1,294,000, and the ONS reported the rate of vacancies continued to slow.
“Job vacancies stand at almost 1.3 million, slightly greater than the number of unemployed people. That means if everyone seeking a job could be matched up with a vacancy, ignoring their location and skills, there would still be a shortfall,” said said Khalaf.
“Against such a backdrop it’s no wonder businesses are willing to cough up more to get new staff and keep existing employees on the books. The number of vacancies fell very slightly on the last reading, which means we may have just crested off the back of the peak and could start to see some normalisation of the labour market.”
However, the widening real term pay gap between the public and private sector risks sparking strikes and industrial action, sending tensions flaring.
“But the big concern is that the higher wages paid by the private sector will serve to entrench inflation, while the small pay rises witnessed in the public sector in the face of soaring prices will continue to stoke industrial tensions,” said Khalaf.
