Wages of British workers up 6.7% as tight labor market persists

Britons' wages surged by an annual rate of 6.7% in the fourth quarter but still left them with less buying power due to red-hot inflation running at 10.5% eroding the value of the pound. EPA-EFE/ANDY RAIN
1 of 2 | Britons' wages surged by an annual rate of 6.7% in the fourth quarter but still left them with less buying power due to red-hot inflation running at 10.5% eroding the value of the pound. EPA-EFE/ANDY RAIN

Feb. 14 (UPI) -- British workers' wages ticked up by 6.7% in the third quarter but failed to keep pace with inflation, official figures out Tuesday show.

However, the Office for National Statistics' Labor Market Review shows that with inflation in Britain running at 10.5%, pay actually fell by 2.5% in real terms, reflecting a tight labor market.


Other than a 4.5% fall during the financial crisis in 2009, the decline was the largest since records began in 2001, the ONS said.

But employers' groups said the pace at which wages were rising was a major drag on economic growth.

Jane Gratton, head of people policy for the British Chamber of Commerce, said businesses are "crying out for people to fill job vacancies at all skill levels" adding doing so must be the "number one focus" for the British government.


"There are still a huge number of vacancies, currently sitting at 1.134 million, and this is stopping firms in their tracks. It means they are struggling to meet the orders on their books, and it puts any plans for growth far out of reach.''

Gratton added that the labor shortage was ramping up pressure on wages which the Bank of England had factored highly in its decisions to raise interest rates to tame inflation.

The ONS report also revealed a twin-track pay trend with the wages of workers in the private sector rising 7.3%, while those employed in the public sector -- civil servants, teachers, police and health service workers -- rose just 4.2%.

A growing gap between the wage increase awards and the rate of inflation, the pace at which prices are rising, amid a cost of living crisis has led to industrial unrest on a scale not seen since the 1970s with more than 843,000 working days to strikes in December alone.

However, the ONS said the increase in pay was the strongest recorded other than during the COVID-19 pandemic.

The unemployment rate increased by 0.1% from the third quarter, to 3.7%, while the number of people unemployed for up to six months increased, driven by people between the ages of 16 and 24.


Those without work for between six and 12 months also increased, while the number unemployed for more than a year fell.

The British employment rate was estimated at 75.6%, up 0.2% from the previous quarter, amid an increase in the hiring of part-time workers.

The discrepancy between the percentages of unemployed versus employed is accounted for by very large numbers of workers -- 21.4% -- the ONS classes as economically inactive.

These are people who have taken early retirement, older workers who have given up looking for work, or people who cannot work due to ill health.

Darren Morgan, director of economic statistics for the ONS, said fewer people found themselves "outside the labor market altogether" in the final quarter of 2022, with some immediately returning to work while others began seeking employment again.

"This meant that although employment rose again, unemployment edged up also," said Morgan.

"Although there is still a large gap between earnings growth in the public and private sectors, this narrowed slightly in the latest period. Overall, pay, though, continues to be outstripped by rising prices."

Morgan also noted a sharp increase in the number of working days lost to strikes in December, with transport and communications "the most heavily affected area"


The total number of strike days from June to December 2022 was more than 2.4 million, the highest total for a calendar year since 1989.

Industrial disputes over pay and working conditions have seen tens of thousands of workers walk out on strike in the past few months including border force staff, postal workers, rail workers, nurses and paramedics.

The pay and employment numbers come just days after the ONS said Britain narrowly avoided a recession in the fourth quarter with the economy neither growing nor contracting, despite GDP going into reverse in December, dropping by 0.5% after a 0.1% rise in November.

The IMF and the Bank of England both forecast that Britain will go into recession this year. The IMF's GDP forecast is -0.6% while the BoE sees the economy shrinking by 0.7%.

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