ONS: After six years, wage rises match inflation

 
crowd of people Wages are rising faster than inflation for the first time in six years

After nearly six years of falling real wages, rises in weekly earnings have finally caught up with inflation.

Weekly wages, including bonuses, rose by 1.7% in the year to February, up from 1.4% in January, according to the Office for National Statistics (ONS).

Consumer Prices Index (CPI) inflation stood at 1.7% in February and fell to 1.6% in March.

It is the first time that earnings have matched inflation for six years, apart from two months in 2010.

Chart showing how rising wages have caught up with falling inflation for the first time in recent years

Analysis

Earnings move above cost-of-living increases. That headline will dominate much of the debate around these labour market figures.

The inflation rate of 1.6% covers the year to March, while the 1.7% rise in average earnings including bonuses is the annual rate recorded between December and February. But the broad trend is clear.

The squeeze on workers' living standards which has persisted more or less continuously since 2008 is technically over.

That being said, on one estimate, real wages have declined 10% over that period and it may be a while before the lost ground is clawed back.

The drop in the unemployment rate to 6.9% is noteworthy, though less important to the Bank of England since it amended its forward guidance policy on interest rates.

It is worth noting that of the 239,000 increase in those in work over the quarter, 146,000 was self-employment. The debate over how many of the self-employed are there only because they have lost jobs elsewhere will continue.

However, when bonus payments are excluded from the figures, wages rose by 1.4%, still below the rate of inflation.

The latest figures for wages measure the three months to February. At that time CPI was at 1.7%.

Other statistics from the ONS show how inflation has eroded the value of pay over the last six years.

While earnings rose by 8.6% since July 2008, prices rose by 16.9%.

Public sector

Although the figures suggest that people's purchasing power is now improving, it will be several years yet before real wages are back to the level they were before the financial crisis.

The Office for Budget Responsibility (OBR) has estimated that real incomes will not return to their 2009-10 levels until 2018 at the earliest.

And since the start of the financial crisis, real pay has fallen by a "colossal" 10%, according to Capital Economics.

That is said to be the biggest fall in any five-year period since the 1920s.

However, the government has said that all but the top 10% of earners are already seeing their incomes rise, once tax cuts are taken into consideration.

David Freeman from the Office for National Statistics says average pay rises are outstripping the rate of inflation for the first time in four years

The latest figures for average wage rises also conceal a marked divide between workers in the public and private sectors.

Those in the private sector are now enjoying average annual rises of 2%, including bonuses.

By contrast, those in the public sector are only seeing rises of 0.9%.

The figures also exclude the estimated 4m workers - around 15% of the total- in the UK who are self-employed.

According to the Resolution Foundation, such workers are more likely to be involved in "low paid odd-jobbing" rather than highly-paid entrepreneurial jobs.

In other words, the ONS figures may well over-estimate the actual level of pay rises.

 

More on This Story

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +31

    Comment number 883.

    If you believe this you'll believe elephants can fly!

  • rate this
    +32

    Comment number 862.

    Real inflation is much higher than the figure they claim when you factor in things like the housing bubble, the increases in utilities etc it is much higher for many people than the CPI they claim. Also I rarely get a pay rise I get one every 2 or 3 years so how can my wages be catching up with inflation?

  • rate this
    +12

    Comment number 853.

    i have read this headline on various news forums what a lot of rubbish we all know that everthing you can mention has gone up in price over and over again except one thing income from salary or savings investment.the great thing about the interent is forums like this and as we all know knowledge is power!

  • rate this
    +143

    Comment number 140.

    Haven't had a pay rise in years. Don't know anyone who has. An average figure includes and is skewed by the people at the top, raking it in.

  • rate this
    +78

    Comment number 91.

    Averages can be misleading especially when there is a bottom limit but no top limit.In 2013 executive pay rose by 14% and these payments are far higher than most people earn. So a small number of huge pay rises balance off lots of people receiving small pay rises. This fits with what most people know - most of us still have falling real incomes. But those at the top are getting huge increases.

 

Comments 5 of 6

 

More Business stories

RSS

BBC Business Live

  1.  
    HEADLINES
     
  2.  
    MARKET UPDATE 08:34:

    Shares in London are higher in early trading with the FTSE 100 up 16 points

    • Smiths Group slumps 5.4% after sales fall
    • JD Sports up 2.7% following half year results
    • Pound slightly higher at $1.6296
     
  3.  
    SCOTTISH REFERENDUM 08:26: BBC Radio 4

    Former Bank of England Deputy Governor, Sir John Gieve says the Bank is "a creature of Westminster" and will be an adviser in any currency negotiations. "I think it could work, " he says of currency union but adds it "relies on careful negotiation". A lot of policy decision would remain in London, he adds. If the economies of Scotland and the rest of the UK began to diverge more than they do at present that could be a problem.

     
  4.  
    INTERNET OF THINGS 08:17: BBC Radio 4

    The Internet of Things is a phrase bandied around. ARM Holdings boss, Simon Segars is fresh from a conference about it - but it all sounds a bit pedestrian. Mr Segars says one example is a coffee cup that has a microchip in it that could tell you if you're consuming too much coffee. There is already a fork that can tell you if you are eating too quickly. On Today he also mentions apps that help you find a parking space.

     
  5.  
    JD SPORTS 08:11: Radio 5 live

    We're not far off being saturated with sports shops in the UK says Peter Cowgill, executive chairman of JD Sports on Radio 5 live. But the company is having "significant success" competing in Spain, German, France and the Netherlands.

     
  6.  
    PHONES 4U RESCUE 07:57: BBC Radio 4

    It is "perhaps not surprising" that Vodafone and EE are looking at buying parts of Phones4U now that it is in administration, says Laura Lambie of Investec Wealth and Investment on Today. Both EE and Vodafone had been approached by Phones 4U which tried to interest them in buying the retailer, she says. After refusing that approach, Vodafone and EE are now looking "to pick up assets on the cheap", according to Ms Lambie.

     
  7.  
    SONY PROFIT WARNING 07:50:
    xperia phones

    The profit warning at Sony is the result of a review of its mobile phone business. It says there has been "a significant change in the market and competitive environment". As a result, it has taken a £1bn charge to reflect the loss of value of the mobile business. It is reducing the number of models it produces and is concentrating on a premium lineup.

     
  8.  
    JD SPORTS PROFITS 07:36: BBC Radio 4

    "The high street is alive and well," says Peter Cowgill, executive chairman of JD Sports on Today. The retailer has a strong presence in shopping malls and online but Mr Cowgill says a high street presence is "still very important to JD Sports". The retailer has a contingency plan if Scotland votes Yes to independence. But he adds: "We don't think there will be a major impact on our trade. We think there will be no change to prices [if Scotland votes Yes]."

     
  9.  
    SONY PROFIT WARNING 07:32: Breaking News
    Sony office

    Sony expects to report a much deeper loss this year than originally forecast. The firm now expects a loss of 230bn yen (£1.3bn) for the year which ends 31 March. Its previous forecast was for a 50bn yen loss.

     
  10.  
    JD SPORTS PROFITS 07:29:

    Profits at retailer JD Sports doubled in the first half of the year. Before exceptional items it made a pre-tax profit of £19.9m. Sales at stores open for more than a year rose 13% from the same period a year ago. But its fashion business which includes Scotts and Bank had a "disappointing" first half, the company said.

     
  11.  
    INDITEX RESULTS 07:10:
    Zara store

    The world's biggest clothing retailer, Inditex has posted a 2.4% fall in first half net profit. The owner of Zara, made 928m euros (£738m). That was not as bad as some analysts were expecting. The company also said that sales for the start of the third quarter rose 10%.

     
  12.  
    SPACESHIP CONTRACT 06:56: Radio 5 live
    Space X Capsule

    Nasa has awarded up to $6.2bn (£3.8bn) to Boeing and SpaceX to develop space vehicles that can take crew into space. The firms are aiming to have their spaceships ready by 2017. Since the space shuttles were retired in 2011, the Americans have relied on Russia and its Soyuz vehicles to get to the International Space Station.

     
  13.  
    SCOTTISH REFERENDUM 06:38: BBC Radio 4
    Scottish bank notes

    Former Bank of England deputy governor Sir John Gieve tells the Today programme he expects Bank staff to be at work very early on Friday morning to try to calm markets, whichever way Scotland votes in the independence referendum. In particular, the Bank will be busying itself with the possibility of "deposit flight" so that "we don't get the sort of panic that there was with Northern Rock". That means for starters making sure that cash machines remain fully stocked.

     
  14.  
    ARM CHIEF EXECUTIVE 06:27: Radio 5 live
    Arm processor

    It's arguably Britain's most successful technology company, but you may have never heard of it. ARM designs computer chips and is worth almost twice as much as Marks and Spencer. On Wake Up to Money chief executive Simon Segars says most of the firm's customers are in California, China, Taiwan and South Korea. "It's a shame" there are not more technology companies in the UK, he says. People have been keener to go into financial services, Mr Segars says.

     
  15.  
    SCOTTISH REFERENDUM 06:16: Radio 5 live

    Whichever way the Scottish independence vote goes, the business impact "remains unclear" says Nora Senior, chair at Scottish Chambers of Commerce on Wake Up to Money. Big questions over currency, Europe, debt, pensions and tax were raised in the run up to the vote, she says. "Business wants a decision that is clear and swiftly executed," Ms Senior says.

     
  16.  
    BEREAVEMENT AND WORK 06:10: Radio 5 live

    A third of employees who have suffered bereavement in the past five years felt that they had not been treated with compassion by their employer, according to a survey by the Advisory, Conciliation and Arbitration Service (ACAS). It is launching guidance for companies. "Managers need appropriate training and support," said Sir Brendan Barber, ACAS chair on Wake Up to Money.

     
  17.  
    PHONES 4U RESCUE 06:00:
    Phones 4U sign

    The Financial Times is reporting that Vodafone and EE have approached the administrators of Phones 4U about buying parts of the failed business. Around 550 shops and 6,000 jobs are at risk. The private equity owners of Phones 4U and its founder, John Caudwell have blamed the aggressive tactics of EE and Vodafone for the collapse of the firm. Both network operators deny those accusations.

     
  18.  
    05:59: Matthew West Business Reporter

    Morning everyone. As always you can get in touch with us via email on bizlivepage@bbc.co.uk or twitter @bbcbusiness.

     
  19.  
    05:59: Ben Morris Business Reporter

    We'll get the latest unemployment figures and data on earnings at 09:30 this morning. Plus the Financial Times says that Vodafone and EE are looking to buy parts of their former customer, Phones 4U. Stay with us.

     

Features

From BBC Capital

Programmes

  • Three men solving a puzzleThe Travel Show Watch

    Why tourists are heading to Budapest for the chance to break out of a room

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.