Fundamental Analysis UK Wages Rise Faster Than Inflation UK Wages Rise Faster Than Inflation Thursday, 17 May 2018 9:59 Share 0 Tweet 0 Pin it 0 +1 Figures released by the Office for National Statistics (ONS) show that the rise in wages over the last three months has outstripped inflation for the same period. Inflation in the first quarter of 2018 was running at 2.7% whereas the average increase in wages came in at 2.9%, giving most people a shade more disposable income than before. This will not make a vast difference to families in the UK who have had to deal with declining disposable income for more than a year. Whilst the official inflation figure is 2.7%, many people think that true inflation is running above this, explaining why both the “footfall” in shops and retail spending have fallen. Naturally, the appeal of the news depends on your political affiliation. The Chancellor, Philip Hammond was very upbeat about this marginal rise in spending power: "Growth in real wages means that people are starting to feel the benefit of more money in their pockets; another turning point as we build a stronger, fairer economy. The unemployment rate is at its lowest in over 40 years and with our National Living Wage we are making sure that the lowest-paid feel the benefit with an extra £2,000 a year." Frances O’Grady, the leader of the Trades Union Congress (TUC) was more sanguine about the news: "Working people are still not getting a fair deal. Millions of jobs do not pay a real living wage. And average weekly pay is still worth much less than a decade ago." A neutral opinion from accountancy firm PwC’s chief economist, John Hawksworth pointed out that: "The rise in wages will be helpful as it follows a long period when wages have been falling relative to inflation, but wages are still lower in real terms than they were before the financial crisis. and this won't turn round things overnight." ONS said that unemployment in the three month period dipped by 46000, meaning that unemployment is at 4.2% with 1.42 million registered as out of work (and actively seeking employment). The rate of unemployment is the best since 1975 and ought to be forcing wages up as employers struggle to attract applicants to fill vacancies. However, many in work are on part-time hours or “zero hours contracts”, so a strengthening job market ought to show a decline in these numbers as such employees move to full-time working and to less precarious employment contracts. Confusingly, the number of people in work in the three month period rose by 197000, taking the number in work to 32.3 million meaning that 75.6% of adults aged 16 to 64 are in work; the highest proportion since 1971. The mismatch in the figures finding work is because the statistics only count registered unemployed claimants actively seeking work as being unemployed (so, for instance, a young mother taking up a job after her children attain school age would count in the increase in the number of posts filled and the workforce, but would not be counted in the reduction of the unemployed returning to work!). Dr. Mike Campbell Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.