Boris Johnson claims wages are on the up – but what does the data say?
Written by Hit Music Radio News on 04/10/2021
Sky News analysis of the latest ONS data has found that recent wage growth has not kept up with inflation over recent years.
While prices are 11.4% higher than they were in 2015, average weekly earnings (excluding bonuses) have only increased 7.4% over this period.
But Prime Minister Boris Johnson was recently quoted as saying we are seeing record levels of wage growth.
He said that “the numbers show… [that] wages are growing” after “totally flatlining for more than a decade”.
So, what numbers was he referring to?
In June, the annual growth of average weekly earnings was at a 20-year-high, according to data from the Office for National Statistics (ONS).
But, while the annual growth rate is usually a good indicator for wage growth, the ONS warned that this is a misleading measure at the moment.
This is because the UK experienced a short-term “dramatic decline” in earnings growth at the start of the pandemic. So, growth now is artificially inflated because wages today are being compared to a very low baseline.
The pandemic has also changed the composition of jobs, and this has not fed through into the data.
The furlough scheme suppressed official growth figures, as many people stayed in work at lower rates of pay instead of becoming unemployed.
But, this has been more than offset by the high number of job losses in low-paid roles, which has raised the estimated average earnings of workers and so artificially inflated wage growth figures.
The Bank of England estimates underlying pay growth, which takes both these factors into account, is 3.3% – much lower than the official figure of 7.2%
This is not the first time that politicians have come under fire for their misleading use of data during the pandemic.
Last year, the statistics watchdog responded to almost three times as many complaints about the use of data by MPs and civil servants as they did during 2019-20.
What’s the impact of low wage growth?
First and foremost, when prices increase faster than wages, we are able to buy less with our earnings.
But poor wage growth also has a wider impact on the way the economy functions.
Without attractive pay, companies struggle to fill jobs. This can be seen in the data, with more openings in low-paid sectors like transport and manufacturing.
In large part, this is because these sectors relied on cheap labour from the EU.
Now, because of Brexit, we need to fill these roles with UK workers. But a combination of a lack of skills and low wages means we are currently facing an acute labour shortage in many key areas.
And already this is having a negative knock-on impact on the wider economy, with a lack of lorry drivers causing queues at petrol stations and empty supermarket shelves.
The government argues that the current supply chain crisis is the necessary price of the UK’s “transition to a high wage, high skill economy”.
But, so far, this has only led to “short-term wage pressures”, says Nye Cominetti, senior economist at the Resolution Foundation.
“This is only likely to benefit a small subset of workers in specific occupations, and is not a route to general improvements in living standards,” he says.
“Brexit was always going to lead to a big transition in the UK economy… [and] it is not yet clear whether this transition will lead to higher wages and prices, greater automation or simply less being produced.”
The Data and Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open source information. Through multimedia storytelling we aim to better explain the world while also showing how our journalism is done.
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