UK wages rise 4.3 per cent but still lag behind soaring cost of living

15 February 2022, 10:20

Pay and employment are on the up but they are struggling to keep up with the cost of living crisis
Pay and employment are on the up but they are struggling to keep up with the cost of living crisis. Picture: Alamy

By Daisy Stephens

Wages and employment have increased, according to official figures, but both are struggling to keep pace with soaring inflation and the cost of living crisis.

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The Office for National Statistics (ONS) said the number of UK workers on payrolls rose by more than 100,000 between December and January - although the overall number of people in employment is well below pre-pandemic levels, because there are fewer self-employed people.

The unemployment rate also reduced by 0.2 percentage points in the three months to December - as was predicted by analysts.

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Meanwhile, total pay growth rose to 4.3 per cent for the quarter to December but continued to lag behind inflation, which soared to a near 30-year high of 5.4 per cent in December.

It means real wages fell once you adjust for inflation over the quarter, according to the ONS.

Sam Beckett, head of economic statistics at the ONS, said: "The number of employees on payrolls rose again in January 2022 and is now well above pre-pandemic levels.

"However, our Labour Force Survey shows the number of people in employment overall is well below where it was before Covid-19 hit.

"This is because there are now far fewer self-employed people.

"The survey also shows that unemployment has fallen again and is now only fractionally above where it was before the pandemic."

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But despite the cost of living squeeze, Chancellor Rishi Sunak said the jobs market was "healthier than most could have hoped for".

"Our £400 billion economic plan has protected our jobs market through the pandemic and it is now healthier than most could have hoped for," he said.

"Payrolled employee numbers are at a record high and redundancies are at an all-time low thanks to our plan for jobs.

"We're continuing to help more people into work and are providing support for the cost of living worth over £20 billion across this financial year and next."

It comes as people ace mounting pressures from a cost of living crisis which is expected to worsen soon, with energy bills set to surge in April.

Prices of other things are also soaring, with petrol prices reaching a record high on Monday and the cost of using public transport in London also set to skyrocket.

"These figures confirm working people still face a fragile recovery in the face of a growing cost of living crisis and spiralling inflation," said Pat McFadden MP, Labour's shadow chief secretary to the Treasury.

"Twelve years of the Conservatives' record means working people today will not only be paying more in tax under the Conservatives but face heating bills rocketing, prices rising and falling real wages."

The ONS said the number of UK workers on payrolls rose by 108,000 between December and January to 29.5 million.

The unemployment rate also reduced by 0.2 percentage points to 4.1 per cent over the three months to December, in line with the predictions from a consensus of analysts.

The UK employment rate increased by 0.1 percentage points on the quarter to 75.5 per cent, while the number of people deemed economically inactive also increased slightly.

Meanwhile, total pay growth rose to 4.3 per cent for the quarter to December - from 4.2 per cent for the three months to November - but continued to lag behind inflation, which soared to a near 30-year high of 5.4 per cent in December.

The new data also revealed record vacancy levels, with advertised job openings rising to 1.29 million for the three months to January, representing a 513,700 increase on pre-pandemic levels.

Martin Beck, chief economic advisor to the EY Item Club, said: "The latest labour market numbers suggest that the jobs market largely shrugged off the drag on activity from Omicron in December."