Connect with us

Money

Millions of workers face pay cut as wages fall 2.7% – what it means for your money

MILLIONS of workers are facing a cut to pay as inflation eats into household earnings.

New figures released today by the Office for National Statistics (ONS) show that regular pay in real terms fell by 2.7%.

Regular pay in real terms fell by 2.7% from July to September.

This is slightly smaller than the record fall in real regular pay we saw in April to June 2022 (3.0%), but remains among the largest falls in growth since comparable records began in 2001.

Not taking into account inflation this is a rise of 5.7%.

Data from the ONS previously revealed the inflation went up to 10.1% in September from 9.9% in August and is now back to a 40-year high.

Prices are rising at a faster rate than pay, which means people’s incomes are squeezed.

Growth in average total pay, including bonuses, was 6%.

Wages grew by 5.7% in July to September, not including bonuses.

It’s the strongest growth in regular pay seen outside of the coronavirus pandemic period.

But when adjusted for inflation it fell 2.7% in the same period.



It’s a pay cut in real terms as wages are going up, and they don’t match the rate of inflation – which means people are effectively worse off.

Meanwhile, the unemployment rate rose to 3.6% in the three months to September, up from 3.5% from June to August.

The number of employees on payroll continued to grow in October 2022 and is now 834,000 above its pre-pandemic level, the ONS said.

It follows official data last week revealing the economy shrank by 0.2% in the third quarter, putting the UK on course for a prolonged recession amid the cost-of-living crisis.

Darren Morgan, head of labour and economic statistics at the ONS, said: “The proportion of people neither working nor looking for work has risen again.

“August and September saw well over half a million working days lost to strikes, the highest two-month total in more than a decade, with the vast majority coming from the transport and communications sectors.

“Job vacancies continue to fall back from their recent peak, with increasing numbers of employers now telling us that economic pressures are a factor in their decision to hold back on recruitment.”

It comes as the Autumn Statement is being revealed on Thursday and announcements about living wage and benefit rise are expected.

Chancellor Jeremy Hunt said: “I appreciate that people’s hard-earned money isn’t going as far as it should.

“Putin’s illegal war has driven up inflation – a hidden and insidious tax that is eating into paychecks and savings.

“Tackling inflation is my absolute priority and that guides the difficult decisions on tax and spending we will make on Thursday.

“Restoring stability and getting debt falling is our only option to reduce inflation and limit interest rate rises.”

Alice Haine, personal finance analyst at Bestinvest, said: “Personal finance misery is set to worsen this week as the nation braces itself for Chancellor Jeremey Hunt’s raft of tax rises and spending cuts in the Autumn Statement.”

Ms Haine says that there is “little to cheer about” for workers at the moment.

She says that they are not just having their “disposable incomes dented” by higher prices but also soaring borrowing costs and a looming two-year recession.

What it means for your money

The main concern when workers see a “real terms” fall in their salary, is that their pay is not keeping pace with the cost of living.

Even with an average pay increase of 5.7%, wage growth is still way behind inflation as prices of everything from groceries to energy bills are going up at a much faster rate.

But a tight labour market (with high employment and lots of job vacancies) could means it’s a good time to find a new job or ask for a pay rise.

It is likely you’ll still feel the pinch though as the cost of living crisis continues.

Energy prices, fuel and food are are among the essentials which have rocketed.

It means many are struggling to keep up, or have already fallen behind, on bills.

Click to comment

Leave a Reply

Advertisement

Must See

Advertisement

More in Money