12.04.2022

Outlook for living standards worsens with triple whammy of falling pay, more people out of work and labour shortages

This morning’s Labour Market Statistics are disappointing overall (again), says IES (Institute for Employment Studies) Director Tony Wilson.

The further sharp fall in unemployment disguises an unexpectedly large rise in the number of people out of work and not looking for work (‘economically inactive’) with the number not working due to long-term ill health seeing the largest annual increase since comparable records began in 1992 (up by 190 thousand, to 2.34 million – its highest since 2004). Economic inactivity for those aged over 50 has also continued to rise, up by more than 200 thousand in the last year and by more than 600 thousand since the pandemic began. Employment growth also remains very weak, with employment flat on the quarter and still nearly 600 thousand below the start of the pandemic. This continues to happen despite record levels of vacancies, with now as many vacancies as there are unemployed people, for the first time in at least fifty years.

Separate earnings data published today also shows that ‘real’ pay, after adjusting for inflation and not including bonuses, fell by 1.1% year on year – the largest fall since 2013. This has inevitably been fuelled by rising inflation, with decent nominal pay growth (of 4.1% on the year) not doing enough to offset this. However total pay growth was marginally positive on the year, reflecting exceptionally high bonus payments in this period.

Wilson said: “This data shows that the living standards crisis is already starting to bite. With inflation now well above five per cent, real pay excluding bonuses has seen its largest fall since 2013 and will fall further in the coming months. However the picture for those out of work is if anything worse, with employment flat overall, four hundred thousand more people out of work than before the pandemic began, and a record rise today in the number not working due to long-term ill health. This is in turn fuelling acute labour shortages which in turn will be holding back growth and may fuel further inflation. For the first time in at least fifty years, there are now as many vacancies as there are unemployed people.

“This triple whammy of falling pay, more people out of work and labour shortages is only going to get worse as inflation continues to rise through the summer. The Spring Statement missed an opportunity to address this, but we need urgent action now to protect incomes and raise participation, especially for older people and those with health conditions. Employers will need to do more too, and make sure that jobs are advertised and designed in ways that are accessible and inclusive for older people.”

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