Here's Why You're Actually Earning Less (Despite What Your Pay Slip Says)
Here's Why You're Actually Earning Less (Despite What Your Pay Slip Says)
Asa Bennett— The Huffington Post UK
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George Osborne, U.K. chancellor of the exchequer, pauses during the Institute of Directors (IOD) annual convention at the Royal Albert Hall in London, U.K., on Friday, Oct. 3, 2014. Osborne told the IOD 'clearly the economy is growing, unemployment has fallen sharply and business investment has picked up,'. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
Bloomberg via Getty Images
The pay squeeze is not yet over, despite the resurgent economy, as official figures show that inflation is continuing to eat into wages.
The Office for National Statistics revealed that the rate of inflation under the Consumer Price Index (CPI) fell to a five-year low in September of 1.2%, down from 1.5% in August, in welcome news that the cost of living is easing. However, this still means inflation is outpacing the rate of pay growth, so wages are still falling in real terms.
Meanwhile, the rate of Retail Price Index (RPI) inflation - which factors in housing costs - fell to 2.3% from 2.4% the previous month. The ONS also revealed that house prices across Britain rose by 11.7% over the year to a new record high of £274,000, as London led the way with a 19.6% surge.
Labour's shadow Treasury minister Catherine McKinnell warned that "the squeeze on working people continues despite this fall in the rate of inflation".
"Total pay is rising at just 0.6 per cent, which is half the rate of CPI inflation announced today," she added. "Working people whose real wages have fallen by £1,600 a year since 2010 face a further hit if the Tories win the election and cut tax credits again."
Howard Archer, chief UK economist at IHS Global Insight, said: "Earnings growth will likely strengthen only gradually over the coming months, owing to still-appreciable labour market slack."
"We expect earnings growth to gradually trend up over the coming months, with the gains accelerating as 2015 progresses - as sustained decent economic growth, easing slack in the labour market and optimism in the outlook causes a growing number of employers to lift pay."
The ONS last month noted that wages were still being eaten away by inflation as pay excluding bonuses grew by just 0.7%, the lowest on record, in the last year. "This reflects low pay growth across a wide range of industrial sectors," the statistics body concluded.
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The ONS chart shows inflation is still eating away at your pay packet
10 Facts George Osborne Wants You To Ignore Now The Great Depression Nears An End
Are we really better off than we were six years ago? (01 of10)
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The ONS says that GDP per capita, which gives a sense of individual wealth, was still 5.1% below its pre-crisis peak by the end of 2012. (credit:Christopher Furlong via Getty Images)
We're better off... due to drugs and prostitutes(02 of10)
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The ONS has now factored in spending on drugs and prostitutes into its calculations, estimating that it is worth 0.5% of GDP."The vast majority of illegal drugs that households consume are assumed to be imported from overseas," it adds. Labour have seized on this, with shadow chief secretary Chris Leslie saying “these accounting changes to the way GDP is measured do not mean families or businesses are better off." (credit:Jan Sochor/CON via Getty Images)
This is still the slowest recovery on record(03 of10)
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The ONS still say that the recovery has been the slowest since its records begam, with chief economist Joe Grice describing it as "unusually slow". Meanwhile, the National Institute for Economic and Social Research suggest that it has been the slowest recovery in 100 years. (credit:NIESR )
And the deepest recession on record(04 of10)
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ONS chief economist Joe Grice said: "It remains the case that the UK experienced the deepest recession since ONS records began in 1948" (credit:ASSOCIATED PRESS)
We're still not very productive (05 of10)
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The ONS states: "The headline story of weak productivity remains, and the latest GDP growth revisions do not offer a solution to the ‘productivity conundrum’." Economic productivity was still 2.5% below its pre-crisis peak in the last quarter of 2012, the statistics body said.
Your pay will not have fallen this far since Disraeli(06 of10)
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Britons' wages will by next May never have shrunk so far over the course of a single term of parliament in real terms since the Victorian era, according to research by the House of Commons Library. The last time average earnings, accounting for inflation, slid by a greater amount was from 1874-1880, when Benjamin Disraeli was prime minister. (credit:Dominic Lipinski/PA Wire)
Your pay won't be back to normal for years either(07 of10)
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Inflation is still eating at your pay packet, which means you're getting poorer in real terms, and it will take a while before it not just starts to improve, but returns to pre-recession levels. Your pay packet is still continuing to fall by more than in any prior recovery and is down 8% since May 2010, experts warn.
Osborne will still struggle to get Britain exporting (08 of10)
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The ONS warned: "The contribution of net trade is unchanged and remains weak."Despite Osborne warning in his Budget that he wants businesses to export more, the Office for Budget Responsibility, the government's forecaster, predicts that the UK's exports will still fail to make a net contribution to the country's growth. It said: "Net trade is expected to make little contribution to growth over the remainder of the forecast period, reflecting the weakness of export market growth and a gradual decline in export market share."
Osborne's early actions as chancellor are not viewed much more positively, with the ONS saying: "The early part of the recovery path is broadly unchanged, but stronger growth now prevails through 2011 and 2012." (credit:Oli Scarff via Getty Images)