Cost-of-Living Pressures May Alter Work Patterns in 2023

Main points

• The latest ONS estimates suggest the annual growth rate of average weekly earnings, excluding bonuses, was 6.7 per cent in the fourth quarter of 2022, while pay growth including bonuses was 5.9 per cent. NIESR’s wage tracker estimates that regular (excluding bonuses) and total average weekly earnings will grow at 6.5 and 6.4 per cent, respectively, in the first quarter of 2023.
• Though the fourth quarter of 2022 saw regular pay growth that is once again the largest observed outside of the pandemic period, today’s estimates also highlight that real regular pay in the UK fell by 2.5 per cent, remaining among the largest falls in growth since comparable records began in 2001. The most recent report by Hiring Lab - the economic research branch owned by and utilising the proprietary data of job-posting site Indeed – notes that rising searches for part-time, weekend and night shift work in the three months to January may be a sign of workers taking on extra hours to offset the ongoing erosion of their real incomes.
• The disparity in public and private sector wages has fallen for a third consecutive month, though it remains among the largest seen outside of the pandemic period, with private sector regular pay growing by 7.3 per cent while regular pay in the public sector grew by 4.2 per cent.
• In December 2022, 843,000 working ways were lost due to labour disputes – the highest we have seen since November 2011. Further, the latest ONS Business Insights and Impacts Survey suggests that 15.8 per cent of firms across the UK saw their business affected by industrial action in December 2022, both directly and indirectly. These figures are of concern as more industrial action is set to affect the UK economy over the coming months.

“Today’s ONS figures suggest that economy-wide average weekly earnings, excluding bonuses, grew by 6.7 per cent in the fourth quarter of 2022, a record growth rate in regular pay outside of the pandemic period. As we expected last month, the disparity between private and public sector wage growth continues to decrease, as workers in the private sector saw average regular pay growth of 7.3 per cent in the fourth quarter of 2022 – a record high outside of the pandemic period - while workers in the public sector saw 4.2 per cent. Despite these elevated growth rates, economy-wide real regular pay growth fell by 2.5 per cent, indicating the extent to which inflation continues to erode consumer incomes. Interestingly, the UK employment rate increased by 0.2 percentage points in Q4 relative to Q3, driven by part-time workers, while this period also saw a record-high net flow out of economic inactivity driven by people moving into employment. Taken alongside high-frequency data from job-posting side Indeed, which saw a large increase in searches for part-time, weekend and night shift work in the three months to January, this may be a sign that 2023 will see an uptick in workers taking on extra hours or returning to the labour market to offset cost-of-living pressures.”

Paula Bejarano Carbo
Associate Economist, NIESR

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