ICAEW chart of the week: Wage inflation

My chart for ICAEW this week takes a look at how average earnings have risen over the last decade and how they compare with the headline rate of inflation.

Triple column chart vertically above each other:

Wage inflation
ICAEW chart of the week

Each chart goes from Jan 2015 to Jan 2024 (10 columns)

Top chart: Average earnings net of CPI (orange)

+1.1%, +2.5%, -0.1%, -0.4%, +2.0%, +1.3%, +3.6%, -0.4%, -3.9%, +1.5%

Middle chart: Average earnings (purple)

+1.4%, +2.8%, +1.7%, +2.6%, +3.8%, +3.1%, +4.3%, +5.1%, +6.2%, +5.5%

Bottom chart: CPI (blue)

+0.3%, +0.3%, +1.8%, +3.0%, +1.8%, +1.8%, 0.7%, +5.5%, +10.1%, +4.0%


14 Mar 2024.
Chart by Martin Wheatcroft FCA. Design by Sunday.

Source: ONS, 'Consumer price inflation', 'Labour Force Survey, average weekly earnings (including bonuses)'.

(C) ICAEW 2024

According to the Office for National Statistics (ONS), average weekly earnings including bonuses on a seasonally adjusted basis increased by 5.5% between January 2023 and January 2024 to £672 (equivalent to £2,912 per month). This is 1.5 percentage points higher than the rate of consumer price inflation (CPI) over the same 12-month period of 4.0%.

While this might seem positive for the theoretical ‘average’ worker, this follows a 6.2% increase in the preceding year to January 2023, 3.9 percentage points lower than the corresponding 10.1% increase in consumer prices.

Our chart this week takes these numbers back a decade, with CPI of 0.3%, 0.3%, 1.8%, 3.0%, 1.8%, 1.8%, 0.7%, 5.5%, 10.1% and 4.0% respectively in the years from January 2015 through to January 2024. Average earnings increased by 1.4%, 2.8%, 1.7%, 2.6%, 3.8%, 3.1%, 4.3%, 5.1%, 6.2% and 5.5% respectively over the same period, giving rise to net differences of +1.1%, +2.5%, -0.1%, -0.4%, +2.0%, +1.3%, +1.3%, +3.6%, -0.4%, -3.9% and +1.5%.

Overall, wages have increased faster than inflation over the last decade, up 43.2% compared with a 32.8% increase in the CPI Index, equivalent to average rises of 3.7% a year and 2.9% a year respectively – or a net 0.8 percentage point a year improvement in average wages over CPI.

Private sector wages have risen faster at 45.7% over ten years (3.8% a year on average), while public sector wages have gone up by 33.7% (2.9% a year on average), only marginally ahead of CPI (by 0.07% a year). Of course, averages are just that and individual and household experiences will differ significantly.

This comparison would not be approved of by the statistical authorities, who prefer the consumer prices including housing (CPIH) measure of inflation to headline CPI. However, CPIH was up 31.7% over the past decade to January 2024 (or 2.8% a year on average), so while the numbers might have been slightly different in individual years if we had used CPIH in the chart, the increase in average wages over 10 years is only slightly better – by 1.1% in total or 0.1% a year on average.

Assuming inflation falls to below 2% later this year as predicted, the picture for the coming year is likely to show a significant positive variance for earnings, especially given the 9.8% increase in the minimum wage scheduled for April. This should have the effect of pushing up average earnings, unless something very surprising happens to wages further up the income scale.

For more ICAEW analysis on the economy, click here.

This chart was originally published by ICAEW.

ICAEW chart of the week: How we spend our time

Time may be relative, but that doesn’t stop our national statisticians from attempting to track what we do each and every minute of the day.

Doughnut chart adding up to 24 hours:

Sleep and rest: 8.9 hours
Personal and family: 2.9 hours
Household: 2.6 hours
Work and study: 4.2 hours
Leisure and other: 5.4 hours

According to the Office for National Statistics (ONS), adults in the UK spend 24 hours each day on a wide range of activities.

Our chart this week analyses how we spend our time divided into five broad categories, starting with sleep and rest, which takes up 8.9 hours a day on average, followed by 2.9 hours on average spent on personal and family activities. Unpaid household work takes up 2.6 hours, while work and study absorbs a further 4.2 hours, leaving an average of 5.4 hours for leisure and other activities.

These numbers are averages across the whole week, including weekends, and are based on all adults from the age of 18, including those who have retired.

The statistics are more detailed than shown in the chart with personal and family time of 2.9 hours breaking down into 2.4 hours on personal care, 0.4 hours on unpaid childcare, and 0.1 on unpaid adult care. Personal care in turn can be further analysed into 1.3 hours spent eating and drinking, 0.9 hours on washing, dressing, using the bathroom or self-grooming, 0.1 hours on medication or other health-related care, and 0.1 hours in other personal activities.

The average amount of time spent on work and study of 4.2 hours comprises an average of 1.0 hours travelling, 2.1 hours working away from home, 0.8 hours working from home, and 0.3 hours on study. 

Leisure and other activities of 5.4 hours a day include an average of 3.7 hours in entertainment, socialising and other free time, 0.8 hours using a computer or other device, 0.3 hours on exercise, sports and wellbeing, 0.2 hours on DIY or gardening, 0.1 hours volunteering and 0.3 hours on other activities.

These numbers are averages over the course of a year and how we spend our time will of course vary according to age, gender, employment or study status, physical health, lifestyle and personal interests, as well as by time of year such as when we are on vacation. 

The one constant, at least on our planet’s surface, is that we have only a total of 24 hours to work with. Within that limitation, how to spend our time wisely, or perhaps even enjoyably, will always be a challenge.

This chart was originally published by ICAEW.

ICAEW chart of the week: Workforce

My chart this week looks at the changes in the numbers of people between 16 and 64 who are employed, unemployed or economically inactive over the past three years.

Three section column chart showing changes in those employed, unemployed and inactive aged 16-64 over the the last three years.

Employed: -486,000 (to quarter ending Feb 2021) +520,000 (to quarter ending Aug 2022) = net change +34,000

Unemployed: +385,000, -518,000 = net -133,000

Inactive: +218,000 +106,000 = +324,000

According to the Office for National Statistics, on a seasonally adjusted basis the working-age population (ages 16 to 64) comprised 31,366,000 people in employment, 1,297,000 unemployed and 8,675,000 economically inactive in the quarter from June to August 2019.

As our chart this week illustrates, the numbers in employment fell by 486,000 over the following 18 months to the quarter from December 2019 to February 2021. Over the same period, there were 385,000 more people aged 16 to 64 recorded as being unemployed and 106,000 more as economically inactive. This was a net increase of just 5,000 as the normal growth in population was offset by migrants returning home at the start of the pandemic and a higher death rate than normal as a consequence of the pandemic.

Over the subsequent 18 months to the quarter from June to August 2022, employment of those between the ages of 16 and 64 recovered as the economy reopened, growing by 520,000, while unemployment fell by 518,000. However, the number economically inactive continued to grow, increasing by a further 218,000.

This resulted in a net movement over the three years of 225,000, comprising 34,000 more people in employment (to 31,400,000 in the quarter ended August 2022), 133,000 fewer unemployed (to 1,164,000), and 324,000 more who were economically active (to 8,999,000).

The numbers who were economically inactive in the June to August 2022 quarter comprised 2,419,000 students (up 103,000 from three years previously), 1,726,000 homemakers (down 254,000), 2,662,000 who were sick (up 424,000), 1,181,000 in early retirement (up 61,000) and 1,011,000 others (down 10,000).

This is not the total workforce, which in the quarter to August 2022 also includes 1,355,000 aged 65 or over in employment (up 27,000 from three years previously), 24,000 who were registered as unemployed (up 7,000) and 10,994,000 economically inactive (up 355,000), the majority of whom were retired.

Not shown in the chart is the change in the number of vacancies, which fell by 188,000 in the 18-month period from 812,000 in the quarter from June to August 2019 to 624,000 in the quarter from December 2020 to February 2021 and then rose by 635,000 over the following 18 months to 1,259,000 in the quarter from June to August 2022, a net movement of +447,000 over three years.

There has been much debate about the rise in the number of people who are categorised as long-term sick, which is believed to be down to a combination of ‘long Covid’ and NHS treatment backlogs.

The big jump in vacancies over the last three years – to a point where there are now more vacancies than the number of people recorded as unemployed – is putting significant pressure on businesses that are struggling to recruit new workers. 

This position could change rapidly, however, with many commentators concerned that the cost-of-doing business crisis could result in a sharp rise in unemployment and a fall in vacancies over the next six months as consumers reign back spending in response to energy costs, rapidly rising prices, higher mortgage payments and an increasingly uncertain economic outlook.

This chart was originally published by ICAEW.

ICAEW chart of the week: UK payrolled employees

My chart this week looks at how the number of employees on UK payrolls has been supported by the furlough scheme, with more people employed in October 2021 than before the pandemic.

Chart showing UK payrolled employees in work and on furlough:

Oct 2015: 27.7m
Oct 2016: 28.1m
Oct 2017: 28.5m
Oct 2018: 28.8m
Oct 2019: 29.0m
Nov 2019: 29.1m
Feb 2020: 28.9m
Mar 2020: 22.0m (6.8m on furlough)
Apr 2020: 19.7m (8.8m on furlough)
Oct 2020: 23.8m in October 2020 (2.4m on furlough)
Jan 2021: 23.1m (4.9m on furlough)
Feb 2021: 23.3m (4.7m on furlough)
Sep 2021: 28.1m (1.1m on furlough) 
Oct 2021: 29.4m (no furlough)

Concerns that the end of the furlough scheme in September 2021 would be followed by a sharp rise in unemployment proved to be unfounded, with the flash estimate of the number of people on UK payrolls increasing to 29.4m in October 2021, an increase of 166,000 from the previous month and greater than before the pandemic. This is positive news as it suggests that the majority of the 1.1m still on the furlough scheme when it ended on 30 September 2021 have been able to retain their jobs or have found work elsewhere.

The chart shows how payrolled employees increased gradually before the pandemic from 27.7m in October 2015 to 28.1m in October 2016, 28.5m in October 2017, 28.8m in October 2018 and 29.0m in October 2019, peaking in November 2019 at 29.1m. Numbers fell to 28.9m in February 2020 although on a seasonally adjusted basis the numbers increased slightly. Those in work fell significantly by the end of March 2020 to 22.0m when 6.8m were placed on furlough under the government’s Coronavirus Job Retention Scheme (CJRS) and to 19.7m at the end of April 2020 when 8.8m were on furlough.

Despite the furlough scheme overall payrolled numbers fell during the pandemic from 28.9m in March 2020 (including 6.8m on furlough) to 28.2m in October 2020 (when 2.4m were on furlough) to 28.0m at its lowest in January and February 2021 (when 4.9m and 4.7m were on furlough), before gradually rising to 29.2m in September 2021 (when 1.1m were on furlough) and 29.4m in October 2021 (when no one was on furlough).

Although the flash numbers for October 2021 are provisional and subject to change, they should be sufficiently reliable for policy makers to take some comfort that the furlough scheme has done its job in stabilising the economy and avoiding significant levels of unemployment. However, with the pandemic still not over, there will be concerns about whether growth in employment can be maintained over the coming months. 

According to the ONS, the median monthly pay in October 2021 was £2,005, slightly down on the £2,010 reported for September 2021, but an increase of 4.9% compared with the £1,911 calculated for October 2020. The latter compares with consumer price inflation of 4.2% over the same period.

The idea that we might be emerging from the pandemic with higher levels of employment and wages than before it started might have seemed unlikely at the start of the first lockdown. But then at an estimated total cost of £370bn, of which £70bn was for the CJRS, the eye watering sums incurred by the government in getting to this position have been far from insubstantial.

This chart was originally published by ICAEW.

ICAEW chart of the week: UK claimant count

13 November 2020: The claimant count soared at the start of the pandemic but levelled off since then. Will a wave of redundancies see it climb again over the winter?

UK claimant count. Jan 2019: 1,012,000 (597,000 men, 415,000 women) - Mar 2020: 1,240,000 (724,000, 516,000) - May 2020: 2,663,000 (1,620,000, 1,043,000) - Sep 2020: 2,634,000 (1,571,000, 1,063,000).

This week’s #icaewchartoftheweek looks at the claimant count, an experimental statistic compiled by the Office for National Statistics (ONS) that seeks to reflect those on Universal Credit who are not in employment or who are required to search for work, in addition to those receiving Jobseeker’s Allowance.

As the chart illustrates, the claimant count had already been on an upward path prior to the pandemic as Universal Credit rolled out across the country, reaching a total of 1,240,000 on 8 March before jumping to 2,663,000 a couple of months later in May during the first lockdown. The number has moved around a little since then, dropping slightly to stand at 2,634,000 on 8 October, comprising 1,571,000 men and 1,063,000 women.

The rapid rise in claimants has not been reflected in the same way in the unemployment statistics, which increased less dramatically, albeit still significantly, from 1,355,000 in March to 1,661,000 in September 2020. This suggests around 300,000 of the increase in the claimant count is down to greater unemployment, with the balance of approximately 1,150,000 arising from ‘underemployment’ as claimants have had their hours and/or pay levels cut taking them below the relevant Universal Credit thresholds.

The recent rise in redundancies – up to a record 314,000 in the quarter to September – is likely to add further to the claimant count over the winter, although the extension in furlough arrangements until next March may constrain that rise to a certain extent.

News that a vaccine is on its way may well be positive for the second half of 2021, but in the meantime it is going to be a hard winter for many.

This chart was originally published by ICAEW.