UK private sector pay grew almost five times as fast as public sector workers’ remuneration in the year to May, according to official data released as ministers prepare to sign off on real-terms wage cuts for teachers, doctors and NHS staff.
The figures, showing total pay growth of 7.2 per cent in the private sector compared with 1.5 per cent in the public sector, are likely to galvanise union leaders. Many are threatening strikes if the government holds pay rises below 5 per cent for the current financial year, while inflation soars above 9 per cent.
Prime Minister Boris Johnson’s cabinet is on Tuesday due to sign off on wage settlements covering 2.5mn public sector workers, in one of the most significant decisions left to be taken by his caretaker government.
Unions representing teachers, health workers and civil servants have warned of widespread disruption if ministers approve further real-terms pay cuts for the coming year.
Tuesday’s data, released by the Office for National Statistics, further indicated the stark divide in the economy, because of the almost fivefold disparity between private and public sector pay growth.
Patrick Roach, general secretary of the NASUWT teachers’ union, accused ministers of “contempt” for public sector workers. “If the government hopes that teachers’ anger will dissipate over the course of the summer break, they are wrong,” he said. “Teachers have been badly let down by this government for more than a decade.”
One government official said the 7.2 per cent pay growth in the private sector in the year to May included one-off bonuses on top of an underlying figure of 5 per cent for wages. The public sector figure did not yet include the settlements that would be announced on Tuesday afternoon and backdated to April, he pointed out.
The ONS data also showed hiring remained strong despite the growing pressures of high energy prices and rising living costs, with the employment rate 0.4 percentage points higher in the three months to May than in the previous quarter, at 75.9 per cent.
The unemployment rate held steady at the 3.8 per cent recorded a month earlier — below its pre-coronavirus pandemic level — even though more people were joining the workforce, with economic inactivity down 0.4 percentage points on the quarter.
The number of unfilled jobs edged up to a record of 1.294mn, although the ONS said the rate of growth in vacancies had slowed. Redundancies remained at a record low.
Kitty Ussher, chief economist at the Institute of Directors, said companies struggling to fill vacancies would be encouraged by “early signs” of people who had dropped out of the workforce starting to return. But she added there was nothing in the data to prevent the Bank of England from continuing to raise interest rates at its meeting in early August.
The ONS said growth in average weekly earnings, including bonuses, was 6.2 per cent in the three months to May, equivalent to a real-terms pay cut of 0.9 per cent. Growth in regular weekly earnings of 4.3 per cent equated to a real-terms pay cut of 2.8 per cent — a record drop.
The ONS noted that these figures were slightly distorted by the comparison with a period in which many people had been on furlough but said this was not as great as it had been earlier in the coronavirus pandemic.
Nadhim Zahawi, UK chancellor, said the figures gave “encouragement in uncertain times”, adding that the government was helping households with rising living costs through grants and tax cuts while working alongside the BoE to bear down on inflation.
The tight labour market has given some workers more bargaining power, allowing them to secure bigger wage rises that go at least some way to offset the squeeze on household incomes caused by surging inflation.
“It is markets, not militancy, pushing pay higher,” said Tony Wilson, director of the Institute for Employment Studies, adding that labour costs were a decisive driver of rising prices.
However, Samuel Tombs at the consultancy Pantheon Macroeconomics said the figures would ease pressure on the BoE to step up the pace of monetary tightening. He argued this was because the data showed growth in total pay slowing, labour supply recovering and demand for workers starting to stabilise, with unemployment in the second quarter likely to overshoot the central bank’s forecast.