A return to pay growth, but weekly wages fall for those at the bottom

In response to today’s ASHE data release from the ONS that showed real pay recovering in 2018, Stephen Clarke, Senior Economic Analyst at the Resolution Foundation said:

“Following the squeeze of 2017, real pay growth returned in 2018. After inflation, typical weekly wages for all employees grew by 0.3 percent in the year to April. That’s a welcome relief after the fall of 0.3 per cent recorded in 2017, but well down on the increases we saw in 2016 (2.4 per cent) and 2015 (1.4 per cent).

“Worryingly, today’s figures also show the first growth in pay inequality since 2010. While a rising minimum wage helped boost hourly earnings and reduced the proportion of low-paid jobs to its lowest point since the series began, a drop in hours worked by the lowest-paid resulted in further falls in real weekly wages in the bottom fifth of the distribution.

“By contrast, wages rose most strongly for the highest earners with weekly wages rising by 1 per cent for the top 10 per cent of employees last year. As a result the pay ratio between the highest and lowest earners increased for the first time since 2010.

“This mixed picture comes off the back of a disastrous decade for pay. Despite an acceleration of pay growth in recent months, typical weekly earnings remain £18 lower than they were in 2009.

“The gender pay gap continued to fall in 2018, down by 34 per cent since the survey began two decades ago. Despite this, today’s data shows a slowdown in improvements. In the years running up to the financial crisis the gender pay gap fell at an average rate of 3.5 per cent a year, compared to just 2 per cent over the past five years. Such a slowdown means we can’t grow complacent.”