Earnings growth rose in the private and public sectors by 4.3% in the three months to May, excluding bonuses, the Office for National Statistics said, but that left pay down by 3.7% – a record drop. Labor blamed the Tory government for falling real wages, saying it “left people more exposed to inflation and the cost of living crisis”. TUC general secretary Frances O’Grady said Conservative leadership candidates should bear in mind that “working people in the UK are under the worst pay squeeze in modern history”. He added: “The priority for the country must be to raise wages across the economy – not tax cuts.” Public sector workers fared much worse than those in the private sector, where pay growth was almost five times greater. Average wage growth including bonuses for the private sector was 7.2% in the March-May quarter, while for the public sector it was 1.5%, leaving an average of 6.2%. The government is expected to announce pay awards for 2.5 million public sector workers on Tuesday, with reports that it will offer an average of 5% pay rises. That would be well below the current inflation rate of 9.1%, which hovers above 11% in the autumn according to the Bank of England. Strong bonus payments in some sectors boosted the figures, the ONS said, with the financial and professional services and construction sectors seeing pay rise by 8.2% and 8.1% respectively. The ONS said the 4.3% pay rise without bonuses marked a 2.8% drop in earnings against the preferred measure of inflation – the consumer price index including housing (CPIH). Compared to the standard measure of CPI inflation used by the Treasury and the Bank of England, the fall in real pay in the three months to May was 3.7%, the TUC said. There was better news from data showing that the number of people employed rose in May. More than 290,000 workers joined the labor market, about 120,000 more than City analysts had forecast. Meanwhile, unemployment held steady at 3.8% and employers pushed their vacancy rate to a new high. However, employers have been unable to attract many of the workers who left the labor market during the pandemic to leave the employment rate at 75.9% below pre-pandemic levels. Business groups complained that companies were struggling to hire staff, causing delays in orders and lost income. Jane Gratton, senior official at the British Chambers of Commerce, said: “The labor market remains incredibly tight, in many cases affecting the ability of businesses to maintain normal operations. Although these figures show that the employment rate has increased, it has not had a noticeable impact on the overall number of job vacancies.’ He added that the acute shortage of workers is “suffocating any hope of recovery for many businesses.” as inflation, supply chain disruption and energy costs also add to their headaches.” Matthew Percival, CBI spokesman, said: “Persistent labor and skills shortages are hitting growth and business investment, exacerbating the cost of living crisis. Boosting business confidence to accelerate growth should be top of mind for this and the next government.” Bank of England officials are expected to raise interest rates at their meeting next month despite warnings of a looming recession and wage rises lagging behind inflation. Analysts said the Bank’s monetary policy committee (MPC) would focus on the tightness of the labor market after a much larger than expected rise in employment and how that could translate into higher wage rises as the year progresses. Many of the MPC’s nine members fear that without higher interest rates to slow the economy, workers will drive wages to the current level of inflation of 9.1%, raising business costs and pushing prices higher next year. “Most indicators suggest that the labor market remains tight by historical standards. However, there is still little evidence to suggest that the tightness is being reflected in stronger wage growth. Regular wage growth was only slightly more than half the rate of inflation during that period. He added: “The prospect of inflation moving higher in the autumn means the MPC is likely to continue raising interest rates at its next meetings. But the market’s pricing that suggests the bank ate will reach 2.75% by the end of 2022 appears overstated, given that the data still offer little evidence to validate the MPC’s concerns about the risk of inflationary spillovers through higher wage growth’. Work and Pensions Minister Julie Marson highlighted figures showing 2 million more women have joined the workforce since 2010. Subscribe to the Business Today daily email or follow Guardian Business on Twitter @BusinessDesk He said the government is also targeting over-50s who have left the labor market with support to encourage them to return to work. There are about 1 million fewer workers in the economy than predicted before the pandemic, and it is understood from surveys that many of them are over-50s who suffered from ill health or took early retirement. “That’s why we’re continuing our support to get people of any age or career into work, including a new multi-million pound deal to help over-50s get into and stay in employment,” he said.
