Real wages fall 1% as pay fails to keep pace with inflation in cost of living crisis
WAGES have seen a real terms fall of 1% as pay fails to keep pace with inflation under a cost of living crunch.
Although average total pay and regular pay increased between December 2021 to February 2022, it still hasn't matched soaring inflation.
The average total pay went up by 5.4% between December 2021 to February, according to official figures from the Office for National Statistics.
Regular pay growth - which excludes bonuses - went up 4% over the same period.
But that this growth is below that of the rate of inflation, which has hit 6.2% - a high not seen in decades.
The ONS said with this in mind, real terms growth in total pay was 0.4%, while regular pay fell by 1%.
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It added that "strong bonus" payments was the main driver behind the growth in total pay.
It means that wages still have not increased enough to meet soaring bills from clothes and food to fuel and energy.
ONS director of economic statistics Darren Morgan said: "While strong bonuses continue to mitigate the effects of rising prices on people's total earnings, basic pay is now falling noticeably in real terms."
Inflation is expected to rocket even further later in the year.
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The government's Office for Budget Responsibility predicts that inflation will hit a 40-year high of 8.7% - which will clobber incomes even more.
It also warned households will suffer the biggest fall in real incomes since records began in 1956, with a drop of more than 2.2% this year.
Experts have raised concerns about how families will afford to get by as the year continues.
Interactive investor senior personal finance analyst Myron Jobson said: "The harsh reality is inflation has erased gains in wages and then some, on average - which for many means that while their pay packet has gone up, they can buy less stuff with it.
"With the Bank of England predicting that inflation could hit double digits this year, workers could be trapped in a cycle of bumper wages only to see those gains nullified by rising prices."
Meanwhile, the UK's unemployment rate fell to 3.8%. with the number of job vacancies reaching a record high to 1.29million.
But Mr Morgan said that while vacancies are at a record high, it rose at its "slowest for nearly a year".
The number of workers on payrolls also went up by 35,000 in March to 29.6million.
What it means for your finances
The main cause for concern for workers is that pay is not keeping pace with the rising cost of living.
It means even with a pay rise of 4%, you'll still be earning less in real terms than a year ago because prices are going up at a faster rate.
But a tight labour market (with high employment and lots of job vacancies) should mean it's a good time to find a new job if you need one.
Employers may be struggling to recruit so could offer higher wages or extra perks.
For example, some firms have offered joining bonuses to HGV drivers because there is a shortage of people in the role.
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But pressure on pay could lead the Bank of England to continue raising interest rates, and that's bad news for homeowners.
Higher interest rates will mean bigger monthly repayments for anyone on a variable or tracker mortgage rate.
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