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Shock fall in UK wages is first since 2009 Shock fall in UK wages is first since 2009
(about 9 hours later)
Britons suffered the first fall in wages since the recession of 2009 despite a drop in the unemployment rate to 6.4%. Britain's economic recovery is not feeding through to workers' pockets according to official figures showing that wages fell for the first time since the 2009 recession, despite a fall in the jobless rate to its lowest point since 2008.
Figures from the Office for National Statistics for the April to June quarter showed that wages, including bonuses, fell by 0.2%. Excluding bonus payments, wages were up by 0.6%, the slowest growth rate since 2001, when records began. Figures from the Office for National Statistics (ONS) for the April to June quarter showed that wages, including bonuses, fell by 0.2%. Excluding bonuses, wages rose by 0.6% – the slowest growth rate since 2001, when records began.
The number of people in work rose 167,000 on the previous three months with 132,000 fewer people out of work. Meanwhile, the Bank of England indicated that the squeeze on households will last until the year end as it halved its wage growth estimate for 2014 to 1.25%, below an inflation rate running at 1.9%.
The ONS said the drop in wages was mainly due to a spike last year, when some employers that usually pay bonuses in March shifted them to April. The implication is that the comparison with last year is a statistical blip that should drop out of the wages figures next month when April is no longer included. Recent pay surveys have also shown pay stagnating at below inflation levels. The Chartered Institute of Personnel and Development said last week that pay was likely to stay below inflation for several months and unlikely to jump above inflation until next year.
Recent pay surveys have also shown pay stagnating at below inflation levels. The Chartered Institute of Personnel & Development said last week that pay was likely to stay below inflation for several more months and was unlikely to jump above inflation until next year. John Philpott, director of the Jobs Economist consultancy, said the employment figures reflected the UK's booming economy but that workers were suffering "paymageddon" as wages went into reverse. "Good news for the jobless is being offset by ever slimmer pickings for those already in work, giving the UK labour market a distinctly bittersweet flavour," he said. "This doesn't look like a labour market that needs an interest rate hike to cool it down but instead one where workers appear desperate for a pay hike."
John Philpott, director of The Jobs Economist, said the employment figures reflected the UK's booming economy but that workers were suffering "Paymageddon" as wages went into reverse. The ONS said the drop in wages follows a spike last year, when some employers who usually pay bonuses in March shifted them to April. The implication is that the comparison with the April to July period last year is a statistical blip that should drop out of the wages figures next month when April is no longer included.
"Good news for the jobless is being offset by ever slimmer pickings for those already in work, giving the UK labour market a distinctly bittersweet flavour. This doesn't look like a labour market that needs an interest rate hike to cool it down but instead one where workers appear desperate for a pay hike." James Knightley, UK economist at ING Financial Markets, said the bad news on wages might be shortlived if the minimum wage rise scheduled for October has a ripple effect across the economy. "It is important to remember that the national minimum wage goes up by 3% in October and this could be the catalyst for broader wage increases in the UK economy."
James Knightley, UK economist at ING Financial Markets, said the bad news on wages may be shortlived if the minimum wage rise scheduled for October has a ripple effect across the economy. The number of people in work rose 167,000 on the previous three months to 30.6 million, with 132,000 fewer people out of work, at 2.08 million people. The jobless total is the lowest since the end of 2009, giving an unemployment rate of 6.4%, compared with 6.5% last month.
"It is important to remember that the national minimum wage goes up by 3% in October and this could be the catalyst for broader wage increases in the UK economy." There were also 8.86 million economically inactive people – those without jobs but not seeking or available to work – aged 16-64. This was 15,000 more than in January to March 2014 but 130,000 fewer than a year earlier.
There were 2.08m unemployed people in the April to June quarter, 132,000 fewer than for January to March 2014 and 437,000 fewer than a year earlier. The general secretary of the TUC, Frances O'Grady, said the figures suggested the economy is "very good at creating low-paid jobs, but struggling to create the better-paid work we need for a fair and sustainable recovery".
There were also 8.86m economically inactive people – those out of work but not seeking or available to work – aged from 16 to 64. This was 15,000 more than for January to March 2014 but 130,000 fewer than a year earlier.
The TUC general secretary, Frances O'Grady, said the figures suggested the economy is "very good at creating low-paid jobs, but struggling to create the better-paid work we need for a fair and sustainable recovery".
She said: "Self-employment has been responsible for almost half of the rise in employment over the last year. The fact that self-employed workers generally earn less than employees means our pay crisis is even deeper than previously thought, as their pay is not recorded in official figures."She said: "Self-employment has been responsible for almost half of the rise in employment over the last year. The fact that self-employed workers generally earn less than employees means our pay crisis is even deeper than previously thought, as their pay is not recorded in official figures."
Over the last year, the number of employees increased by 447,000 to reach 25.77m while the number of self-employed climbed by almost as much to reach 4.59 million, an increase of 408,000. In the last year, the number of employees rose by 447,000 to reach 25.77 million while the number of self-employed people climbed by 408,000 to reach 4.59 million.
The secretary of state for work and pensions secretary, Iain Duncan Smith, who has attempted to take some of the credit for falling levels of unemployment following the introduction of stricter eligibility tests on benefit claimants, said the government is targeting full employment. Another factor depressing wages could be the introduction of the government's Nest pension scheme, which covers the 10 million workers not already covered by workplace retirement savings. Employers already part of the scheme must pay at least 1% of salary into workers' Nest pensions, which they may deduct from planned pay rises.
"The best way to help even more people into work is to go on delivering a plan that's creating growth and jobs," he said. The secretary of state for work and pensions, Iain Duncan Smith, who has attempted to take some of the credit for falling levels of unemployment following the introduction of stricter eligibility tests on benefit claimants, said the government is targeting full employment. "The best way to help even more people into work is to go on delivering a plan that's creating growth and jobs," he said.
Chief secretary to the Treasury Danny Alexander said: "There is still a long way to go, but this is solid progress and the significant fall in youth employment is particularly encouraging and welcome."Chief secretary to the Treasury Danny Alexander said: "There is still a long way to go, but this is solid progress and the significant fall in youth employment is particularly encouraging and welcome."
The unemployment rate for 16- to 24-year-olds fell to 16.9%, down from 19.0% in the period January to March and 21.4% a year earlier, but higher than the pre-downturn trough of 13.8% in 2008.The unemployment rate for 16- to 24-year-olds fell to 16.9%, down from 19.0% in the period January to March and 21.4% a year earlier, but higher than the pre-downturn trough of 13.8% in 2008.
Stephen Timms MP, Labour's shadow employment minister, said it was "extremely worrying" that the figures show pay falling far behind inflation. Stephen Timms, the shadow employment minister, said it was "extremely worrying" that the figures show pay falling far behind inflation. "For Iain Duncan Smith to claim that people are better off in the face of these figures shows just how out-of-touch this Tory-led government is," he said.
"For Iain Duncan Smith to claim that people are 'better off' in the face of these figures shows just how out-of-touch this Tory-led government is."