The latest analysis shows that the average worker’s weekly income has increased by just £3.80 compared to a year ago. Despite a rise in wages, the impact of higher living costs has almost nullified any financial gain, according to a report by the Resolution Foundation.
Recent data from the Office for National Statistics revealed that the unemployment rate in the UK has reached 5.1% in the three months leading up to October, up from 5% in the previous month. This marks the highest level of joblessness outside of the Covid pandemic since 2016.
Employers reportedly restrained hiring activities before the recent Budget announcement, and a national insurance hike further dampened the demand for workers. However, there are signs that the decline in job vacancies has stabilized, hinting at potential future job creation.
In real terms, wages increased by only 0.5% in the three months to October, as reported by the ONS. Over the past year, average weekly earnings have risen by a meager £3.80 after accounting for inflation, which the Resolution Foundation likened to covering the cost of a cup of coffee.
The lingering effects of the 2008 financial crisis continue to impact millions of workers, leading to a prolonged period of wage stagnation. Despite some recovery in real wage growth, uncertainties like the Brexit vote and the Covid-19 pandemic have disrupted progress. Forecasts suggest a sluggish wage growth rate of 2% until 2031.
Before adjusting for inflation, wage growth slowed to 4.6% in the three months to October. This deceleration in pay raises may prompt the Bank of England to consider interest rate cuts to stimulate economic activity.
Recent figures indicate a significant drop of 38,000 employees on payrolls in November, the largest decline in five years, signaling a weakened job market. Younger workers, especially those aged between 18 to 24, experienced a notable increase in unemployment levels during the same period.
Liz McKeown, ONS director of economic statistics, highlighted the ongoing deterioration in the labor market, with reduced hiring activity and a rise in unemployment rates, particularly among younger age groups. The TUC General Secretary, Paul Nowak, emphasized the importance of boosting demand through economic support measures like interest rate cuts to aid recovery and assist those who are currently unemployed.