Wages are growing faster than before the pandemic, but have fallen in real terms

“We are getting on and delivering for the country. We are delivering record employment and the fastest wage growth in years.”

At Prime Minister’s Questions last week, the Prime Minister Rishi Sunak said that the government is delivering the “fastest wage growth in years”.

There are several ways wage growth can be counted. We’ve asked Number 10 which specific figures Mr Sunak was referring to, but have not received a response.

The Office for National Statistics (ONS) publishes figures on both regular pay (average weekly earnings excluding bonuses) and total pay (average weekly earnings including bonuses) over a three month period.

Based on the most recent figures, which were published last week, it’s true that the UK is currently seeing nominal wage growth consistently higher than before the pandemic.

However, when looking at real wage growth, which is adjusted for inflation, the picture is quite different.

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Nominal wage growth

In the three months from February to April 2023, nominal total pay increased by 6.5% compared to the same period in 2022, while nominal regular pay increased by 7.2%.

The ONS says that, for regular pay “this is the largest growth rate seen outside of the coronavirus (COVID-19) pandemic where in April to June 2021 the growth rate was 7.3% when the data were affected by base and compositional effects”.

The nominal total pay growth rate, meanwhile, is the highest seen outside the pandemic since 2007.

These figures are pre-tax and other deductions, and do not include earnings from self-employment or people in Northern Ireland. Average weekly earnings are also calculated using mean averages and so may be skewed, for example, by smaller numbers of people with very high earnings.

The ONS also published median monthly pay growth figures, the latest of which show median pay increased by 7% in May 2023 compared to May 2022. As with the mean average pay growth, this continues to be higher than before the pandemic.

Real wage growth

While the UK is seeing higher nominal wage growth, wage growth has in fact decreased in real terms, as a result of higher than usual inflation.

Again, we don’t know exactly what figures or time period Mr Sunak was comparing, but looking at the most recent data, in the three months from February to April 2023, real total pay and real regular pay both fell compared to the same period in 2022 by 2% and 1.3% respectively.

The ONS also publishes single-month growth rates adjusted for inflation, which show that, in April, both total and regular pay fell by 0.3% on the year.

These figures are adjusted using the Consumer Prices Index including owner occupiers' housing costs (CPIH), which is the ONS’ preferred inflation index.

The ONS also publishes figures which are inflation-adjusted using the Consumer Prices Index (CPI), a different inflation measure which does not include housing costs.

The CPI-adjusted figures show that in February to April 2023, total pay fell by 3%, and regular pay fell by 2.3% compared to the same period in the previous year.

Single-month real total and regular pay growth in April 2023 fell by 1.2% and 1% respectively compared to April 2022, when measured using CPI.

Image courtesy of Prime Minister’s Office