Inflation and Tax Rises Will Erode Record Earnings Growth

Pub. Date
16 November, 2021
Pub. Type
Wage Trackers

Downloads

Wage Tracker December 2021

Authors

Cyrille Lenoel

Related Themes

Macro-Economic Modelling and Forecasting

Tags

Econometric ModellingLabour EconomicsLabour MarketsMacroeconomicsWages
  • The strength of AWE is explained by high bonuses, robust public sector pay growth and a cyclical recovery exaggerated by compositional effects and increased weekly average hours due to the end of furlough.
  • The growth rate in average weekly earnings including bonuses (AWE) in Great Britain decreased in the three months to September to 5.8 per cent compared to a year ago, down from 8.8 per cent in the three months to June. This is in line with what we forecast last month and reflects a smaller impact of base effects.
  • We forecast average weekly earnings to decelerate further to 4.1 per cent in the fourth quarter as the base effect fully dissipates.
  • The rise in inflation will mean close to zero average real earnings growth next year if there is no significant increase in underlying wage growth.
  • 8 out of 10 people who became unemployed during the pandemic have returned to employment, but some of them in temporary or zero-hours contracts

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