June’s pay figures: explained
The latest figures from the Office for National Statistics (ONS) show employees experienced a significant drop in their real regular wages in the period covering the three months from February to April 2022 compared to the same period in 2021.
Real regular pay—that is, average weekly earnings excluding bonuses, adjusted for inflation—fell by 2.2%.
This decrease has been widely reported. However, some news coverage, such as that featured on The Sun’s website, has not reported figures which show the difference in pay once bonuses are taken into account, known as total pay, actually increased.
This is important, as real total pay—average weekly earnings including bonuses, adjusted for inflation—presents a more complete picture of the amount of money employees actually receive than regular pay, though it’s worth noting that both figures are before tax and other deductions.
In the three months from February to April 2022, real total pay increased by 0.4% compared to the same period in 2021.
The ONS says that this increase is a result of “strong bonus payments” paid to employees over the past 10 months, and noted that bonuses in March 2022 in particular were “extremely high”.
The Guardian's coverage reports that the increase in total pay was driven by “a sharp rise in City bonuses”. While the ONS does say that bonuses were highest in the financial and business services sector, it notes they were also high across several sectors.
It’s important to note that these figures do not include earnings from self-employment or people in Northern Ireland. Also the increase in real total pay reported by the ONS doesn’t necessarily mean that employees are actually better off than they were a year ago, once tax and benefit changes are taken into account.
Average weekly earnings are also calculated using mean averages and so may be skewed by high earners.
Different ways to measure earnings growth
The figures cited above measure change between three-month periods, but it’s also possible to measure earnings growth on a single month basis.
When looking at single months, both regular and total pay decreased between April 2022 and April 2021, by 3.4% and 2.7% respectively in real terms.
In addition, all these figures are adjusted for inflation using the Consumer Prices Index including owner occupiers' housing costs (CPIH), which is the ONS’s preferred inflation index.
However, this month the ONS has also started to publish figures adjusting using the Consumer Prices Index (CPI), a different inflation measure which does not include housing costs.
Over the three month period between February and April 2022, real regular pay and real total pay saw year-on-year decreases of 3.0% and 0.5% respectively when measured using the CPI.
Image courtesy of Towfiqu Barbhuiya