With UK inflation set to exceed 10 per cent later this year, the Bank of England governor Andrew Bailey has repeated his call for workers to “think and reflect” before asking for pay rises.
The governor’s call for pay restraint comes as real wages are forecast to fall by 3.4 per cent between 2021 and 2023, a hit to living standards 17 times larger than that experienced at the height of the 2008-09 financial crisis (0.2 per cent).
Data released today (17 May) by the Office for National Statistics shows that a shortage of workers in the construction, hospitality and retail sectors has forced employers to raise nominal weekly wages by, respectively, an average of £106, £51 and £35 in the year to March.
However, wage gains in these three sectors amounted to just 11 per cent of the overall increase in the UK wage bill, less than half the impact of the £862 boost to weekly incomes in the financial sector (25 per cent).
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In February, Bailey’s call for general wage restraint provoked outrage among policymakers and trade unions.
Responding to these criticisms on Monday (16 May), Bailey defended his comments but directed them at high earners. “I do think people, particularly people who are on higher earnings, should think and reflect on asking for high wage increases,” the governor told MPs.
The Trades Union Congress deputy general-secretary Paul Nowak described Bailey’s continued call for wage restraint as “unbelievable”.
“Let’s be crystal clear,” said Nowak. “Global energy prices are driving up inflation – not pay claims.”
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In the year to March, official data shows, the increase in the cost of services accounted for just 32 per cent of overall inflation. Of this, a majority was due to the rising costs of housing and transportation (53 per cent), neither of which are clearly related to labour costs.
The rising costs of energy, housing and durable and semi-durable goods accounted for 53 per cent of overall inflation.