Chancellor of the Exchequer Rachel Reeves has been warned not to make her Autumn Budget a triple whammy for workers. New figures show wage growth has fallen to its lowest level for more than three years as firms continue to clamp down on hiring.
The Office for National Statistics (ONS) said regular wage growth, excluding bonuses, dropped to 4.8% in the three months to July, down from 5% in the previous three months and the lowest since May 2022. While wages are still outstripping inflation this is at a slower pace, as real earnings growth – with the Consumer Prices Index (CPI) taken into account fell to 1.2%, which is the lowest point since September 2023.
The ONS said the rate of unemployment was unchanged at 4.7% in the three months to July, however it said caution was needed over the reliability of the statistic amid an ongoing overhaul of the workforce survey. But there was a further fall of 8,000 for the number of payrolled workers last month and another 10,000 drop in vacancies over the quarter to August.
Ben Harrison, Director of the Work Foundation at Lancaster University, a leading think tank for improving working lives in the UK, has now urged the chancellor to make sure she does not increase the pressure still further for low paid workers. He said: “Today’s figures highlight the challenge the Government faces in turning the economy around as the labour market continues to show signs of cooling.
“Unemployment continues to creep up. It is now at the high level in just under four years at 4.7%, and up 194,000 on the year. Concerningly for Ministers seeking to create additional pathways to work, there are now more people looking for fewer available jobs – with 2.3 jobseekers per vacancy. And the risk remains that unemployment rises further in the months ahead.
“The cooling labour market has also impacted wage growth. Nominal wage growth slowed to 4.8%, which is the first time it has dipped below 5% for three years since June 2022. Worryingly, this period of consistent pay growth has not fed through to real wages. Workers remain only £24 better off since the start of the Financial Crisis in August 2008.
“The combination of stagnant living standards and sticky inflation means that people are still likely to feel pessimistic about their household finances one year into the new Parliament. Only half of workers (48%) believe wage increases are keeping up with the cost of living and just 43% expect an above inflation pay rise in the next 12 months.
“As the potential for tax rises looms at the upcoming Autumn Budget, Government must ensure it does not increase the pressure on lower income workers who have borne the brunt of this squeeze in recent years.”
Rachel Reeves is due to deliver her Autumn Budget on Wednesday, November 26.