Cost-of-living squeeze ramps up as fall in real wages continue

Main points

• NIESR’s wage tracker predicts that average weekly earnings growth will grow at 6.1 per cent in the second quarter of 2022, after increasing by 7.0 per cent in the first quarter. The strong growth is underpinned by a combination of high bonus payments and increasing regular pay.
• We maintain our AWE forecast for total pay in the private-sector to grow at 6.7 per cent in the second quarter of this year, with growth in regular pay expected to be slightly lower than in the first quarter of this year.
• We expect public-sector total AWE growth to reach around 3 per cent in the second quarter of the year.

"This morning’s announcement from the ONS indicates the squeeze on UK living standards intensified as regular wage growth fell further behind the rate of inflation. With inflation expected to reach 8.3% in the fourth quarter of this year and the Health and Social Care levy being introduced, workers are facing an extraordinary decline in their real disposable incomes. The MPC are raising interest rates to help bring inflation back to its 2.0 per cent target. However, there is a chance that pay demands could ramp up if workers’ expectations are that inflation will remain higher for longer, potentially triggering a price-wage spiral”

Dr Kemar Whyte
Senior Economist, NIESR

See our previous wage tracker to follow the analysis

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