Wages are slowly recovering from the effects of Covid-19, but pay growth in real terms has been non-existent for the past 12 years, official figures have shown.
Figures from the Office for National Statistics, published today (October 13), showed annual growth in employee pay grew in August as people continued to return to work from furlough.
Wages grew by 1.9 per cent for total pay (which includes bonuses) and 1.7 per cent for regular pay.
This followed significant falls in the months since April when wage growth was dampened by 80 per cent pay for furloughed employees and reduced or loss of bonuses.
However, in real terms, total pay is growing at a slower rate than inflation and from June to August 2020 it was negative, at -0.8 per cent, while regular pay growth was positive at just 0.1 per cent.
Total pay in real terms was estimated at £507 per week in August and remains below the £522 seen in February 2008, the highest pay level on record.
On the back of today’s figures, Laith Khalaf, financial analyst at AJ Bell, pointed out the UK has not seen any real wage growth for 12 years.
He said: “Prior to the financial crisis regular pay growth was averaging about 4 per cent a year, or 2 per cent above inflation.
“Since October 2008, wage growth has averaged 2 per cent, and is flat after factoring in inflation.
“In other words, wages have gone nowhere in 12 years in real terms. Given what’s happened to house prices over the same period, it’s no wonder so many people can’t afford to get on the housing ladder.”
He added: “Looking forward things look set to get worse before they get better for the UK economy, as furlough expires and greater social restrictions are enforced, albeit not nationwide."
He warned the "huge cost" of the Covid crisis response also needed to be reckoned with.
The IFS estimates borrowing will hit £350bn this year, a level never seen in peacetime Britain.
“The government will probably wait until it can at least see the edge of the woods before it lays out its plans to balance the books, but tax rises looks set to be on Rishi’s menu," Mr Khalaf said.
The ONS figures also showed that unemployment rates have hit their highest level in three years.
The unemployment rate grew to 4.5 per cent in the three months to August, pushing up the total to 1.52m unemployed workers, compared with 4.1 per cent in the previous quarter.
Meanwhile, redundancies rose to their highest level since 2009.
And Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the situation would only get worse.
She said: “’The worst is yet to come however, given that the mass furlough scheme won’t be ending for another few weeks.
“With the general subsidy removed, many thousands more people are expected to be ejected from their jobs into what will be a difficult search for work.