Millions of workers face pay cut as wages fall 2.7% – what it means for your money
MILLIONS of workers are facing a cut to pay as inflation eats into household earnings.
New figures released today by the Office for National Statistics (ONS) show that regular pay in real terms fell by 2.7%.
It’s slightly smaller decrease than the biggest ever drop in April to June of 3%, but it is still one of the largest falls seen since records began in 2001.
Data from the ONS previously revealed the inflation went up to 10.1% in September from 9.9% in August and is now back to a 40-year high.
Prices are rising at a faster rate than pay, which means people’s incomes are squeezed.
Growth in average total pay, including bonuses, was 6%.
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Wages grew by 5.7% in July to September, not including bonuses.
It’s the strongest growth in wages seen outside of the coronavirus pandemic period.
But when adjusted for inflation it fell 2.7% in the same period.
It’s a pay cut in real terms as wages are going up, and they don’t match the rate of inflation – which means people are effectively worse off.
Meanwhile, the unemployment rate rose to 3.6% in the three months to September, up from 3.5% from June to August – but it remains near a 50-year low.
The number of employees on payroll continued to grow in October 2022 and is now 834,000 above its pre-pandemic level, the ONS said.
It follows official data last week revealing the economy shrank by 0.2% in the third quarter, putting the UK on course for a prolonged recession amid the cost-of-living crisis.
Darren Morgan, head of labour and economic statistics at the ONS, said: “The proportion of people neither working nor looking for work has risen again.
“August and September saw well over half a million working days lost to strikes, the highest two-month total in more than a decade, with the vast majority coming from the transport and communications sectors.
“Job vacancies continue to fall back from their recent peak, with increasing numbers of employers now telling us that economic pressures are a factor in their decision to hold back on recruitment.”
It comes as the Autumn Statement is being revealed on Thursday and announcements about living wage and benefit rise are expected.
Chancellor Jeremy Hunt said: “I appreciate that people’s hard-earned money isn’t going as far as it should.
“Putin’s illegal war has driven up inflation – a hidden and insidious tax that is eating into paychecks and savings.
“Tackling inflation is my absolute priority and that guides the difficult decisions on tax and spending we will make on Thursday.
“Restoring stability and getting debt falling is our only option to reduce inflation and limit interest rate rises.”
Alice Haine, personal finance analyst at Bestinvest, said: “Personal finance misery is set to worsen this week as the nation braces itself for Chancellor Jeremey Hunt’s raft of tax rises and spending cuts in the Autumn Statement.”
Ms Haine says that there is “little to cheer about” for workers at the moment.
She says that they are not just having their “disposable incomes dented” by higher prices but also soaring borrowing costs and a looming two-year recession.
What it means for your money
The main concern when workers see a “real terms” fall in their salary, is that their pay is not keeping pace with the cost of living.
Even with an average pay increase of 5.7%, wage growth is still way behind inflation as prices of everything from groceries to energy bills are going up at a much faster rate.
But a tight labour market (with high employment and lots of job vacancies) could means it’s a good time to find a new job or ask for a pay rise.
It is likely you’ll still feel the pinch though as the cost of living crisis continues.
Energy prices, fuel and food are are among the essentials which have rocketed.
It means many are struggling to keep up, or have already fallen behind, on bills.
How you can get help if you’re struggling
Over six million people with disabilities are now receiving £150 to help with the rising cost of living.
From October 1, all UK households began receiving the £400 energy bills rebate.
The payment will be made up of six discounts between October and March next year.
Households will receive a £66 energy bill discount between last month and this one, and a discount worth £67 in December, January, February and March.
We’ve listed how the leading energy suppliers plan to pay households the discount and are waiting on others to respond.
The way you’ll be paid will depend on how you pay for your energy.
If you’re on a credit meter the discount will come off your bills, but if you’re on a prepayment meter you’ll get a voucher.
Check with your supplier to confirm how you’ll receive the cash.
From this month, a £300 one-off “pensioner cost of living payment” will be paid out to eight million households.
It will be given to those who already get the winter fuel payment – which is worth between £100 and £300 for those over the state pension age.
Millions of households are in line to get the £150 Warm Home Discount between December and March 2023.
There are plenty of energy grants and schemes open to help you out if you’re struggling.
British Gas has recently confirmed that it’ll pay its most vulnerable customers grants worth £750 to help with sky-high bills.
The British Gas Energy Trust has previously paid struggling households up to £1,500 – and you don’t need to be a British Gas customer to apply for this help.
Ask your supplier what’s on offer and how to apply, or check here:
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Universal Credit claimants will also receive an extra cash bonus on top of the second half of the £650 cost of living payment that will be landing in bank accounts this month.
In December, millions of people who claim UC and other benefits will be able to get their hands on an extra Christmas bonus cash boost – find out more here.