British workers have experienced their first real pay rise in a year, as average wage growth has finally overtaken inflation. The Office for National Statistics (ONS) reported that in the three months to February, average weekly earnings excluding bonuses increased by 2.8% year-on-year, unchanged from January but sufficient to hand workers a real pay rise as inflation fell to 2.7%.
The unemployment rate unexpectedly dropped to 4.2%, its lowest since 1975, while employment reached a record high of 32.2 million. The number of job vacancies remained near record levels at 815,000, amid concerns over labour shortages triggered by Brexit. However, the ONS noted that real pay grew by only 0.2% when using its preferred inflation measure, CPIH, which stood at 2.6%.
Despite the positive news, some economists urged caution, noting that using the average CPI rate over the three months (2.9%) still showed no real wage growth. The Resolution Foundation highlighted that average annual earnings remain nearly £800 lower than a decade ago, with gains uneven across sectors. Public sector workers continued to experience a squeeze, while finance and construction saw real pay rises of 2.8% and 1.5% respectively.
The TUC warned that pay packets are forecast to stay below pre-crisis levels until the mid-2020s, calling for a higher minimum wage and stronger worker rights. Labour's shadow chancellor, John McDonnell, blamed the Conservatives for economic failure, citing government estimates that average real earnings in 2021 will be £1,733 lower than forecast in November 2016.
