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Wages not keeping up with rising inflation

UK wages have not kept up with the rising cost of living between November and January. ONS figures show that wages have risen but it does not keep up with rising prices of essential items, which means they have actually fallen by 1 percent. 

There are also concerns the war in Ukraine will push up energy and food bills. However, the number of people who are unemployed has dropped to pre-pandemic levels.

According to the Office for National Statistics said were 1.34 million unemployed between November and January, therefore below the 1.36 million recorded in December to February 2020. 

However job vacancies hit another record high, as the unemployment rate fell to 3.9 percent in the most recent quarter.

“Businesses across the country are doing what they can on pay, both for existing staff and to help them hire in a jobs market experiencing a severe labour shortage. But rising inflation both makes that effort hard, and reduces the gains workers feel from pay rises. In real terms, average pay has fallen compared to last year. Now is not the right time to be increasing taxes on work for both companies and workers,” said Chief Executive of the Recruitment & Employment Confederation Neil Carberry

 “A key way to reduce the pressure on our economy and keep inflation down will be to focus on ensuring employment rates and hours worked recover to pre-pandemic levels. Inactivity is still rising, so firms and government need to work together to address this. Recruiters have a key role to play here, from helping government with activation schemes to supporting employers with new forms of job offer to tempt people back into work.”

Inflation at highest in 3 decades

Employees’ regular pay, excluding bonuses, grew by 3.8 percent between November and January when compared to 2021 says the ONS. But, inflation has gone up to its highest levels in 30 years, with increasing costs of food, energy and household goods.

The Resolution Foundation think tank – which calculates the Real Living Wage has warned that workers will feel the pinch as the months go on, and those on the lowest incomes will be most affected. 

Household prices for essentials surged by 5.5 percent in the 12 months to January, up from 5.4 percent in December, according to ONS figures, which has increased pressure on household budgets.

Joanne Frew, head of employment at global legal business, DWF said the figures show market recovery:  “The highlights for the period between November 2021 and January 2022 show an estimated UK employment rate of 75.6%, 0.1% higher than the previous quarter. The UK unemployment rate was estimated at 3.9%, 0.2% lower than the previous quarter and significantly returning to pre-pandemic levels.”

She added: “For now, many employers are taking the opportunity to consider the next step out of the pandemic carefully as restrictions are eased and there is a move to personal responsibility.  A recent survey from the Chartered Management Institute found that 84% of firms had adopted hybrid working.  With retention and recruitment difficulties continuing, employers are having to think of new and innovative ways to attract the best talent, as well as the more traditional route of increased pay.”  

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