2% not 4% continuous pay growth – the ONS response
Our concern is that the 4.1 per cent figure has been widely used as guide to central, average or underlying experience in the economy. For example, in the Autumn Statement the Treasury stated that:
‘those in continuous employment for the past year saw wage growth of 4.1%’.
Presenting this data in this way is misleading both from the perspective of living standards and underlying inflationary pressures. Our previous work has shown that earnings growth at the median level of earnings is unlikely to be representative of earnings growth and living standards experienced across the income distribution.
The new ONS analysis in the Economic Review has been a very valuable means to better understanding the distribution of earnings growth, and is clear in its conclusions that the average real pay rise over the last year, even for those in continuous full-time work, is effectively zero. Today the Resolution Foundation has also published research drawing similar conclusions.
It is now for the UK Statistics Authority to advise on a way forward. We have written to them today to ask that they ensure the Treasury corrects their interpretation of the underlying trends accordingly.