Wages have been growing for months as workers seek to alleviate the impact of the cost of living crisis in any way they can, but the growth has been unequal across many sectors.
Official figures showed that average regular wages, not including bonuses, jumped 7.2% higher in the three months to April, up from 6.8% in the three months to March and higher than expected.
Despite the record surge, the Office for National Statistics (ONS) revealed pay continues to be outstripped by rising prices, with regular wages down 2.3% with Consumer Prices Index inflation (CPI) taken into account.
This means that inflation is now only 1.3% ahead of wage growth, which still represents a real terms pay cut, but nowhere near as large as previous months.
The Resolution Foundation noted the figures showed a stark contrast between pay growth in the public and private sectors.
They noted since January 2022, wages in the private sector have been consistently increasing from around £550 a week to £600 in April 2023.
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But in the public sector, wage growth has plateaued; it rose steadily from January 2022 to the middle of the year before rising sharply in the final six months of 2022.
It has barely moved since the start of 2023, hovering around £620 a week.
Strikes have plagued the public sector for months as workers demanded pay rises to match inflation, which the government refused to budge on.
Even in sectors that have agreed to significant pay rises, they are still below the private sector average.
Downing Street said the government was “conscious about the potential for a wage-price spiral”, and that’s why “difficult decisions” were made about public sector pay.
This week, we got official confirmation that the Reserve Bank has finally achieved the recession it has worked so hard to engineer. The Bank has bludgeoned borrowers and households with interest rate hikes and sought to ease wage pressure by creating recessionary conditions predicted to throw thousands of New Zealanders out of work. Hold the champagne, right?
The Reserve Bank’s relentless jacking of interest rates has sent pain waves through many New Zealand households, with the worst yet to come. This pain was misdirected in that many of the leading causes of inflation (some located offshore) were left entirely untouched by our central Bank tugging and pulling at the interest rate lever.
Limited Respite from 18-Month Wage Pain Amidst Lingering Challenges of Cost of Living
The sustained hikes were also unnecessary, given that the Reserve Bank has said that inflation was due to return to close to the target range by late 2024, regardless and by natural means. There was never a serious risk of a 1970s-style wage/price spiral. Among other things, unions no longer have the power to deliver the wage hikes required.
So… Was slaying the inflation bogey a year or 18 months early worth causing so much hardship to people and damage to our productive base? Even though inflation – worldwide – has peaked, the worst of this central bank-engendered pain for New Zealanders is yet to come. The bank economists told RNZ this week that the unemployment rate will likely reach over 5% by next year. Mission accomplished.
The UK’s cost of living crisis escalates daily. Experts say we are cladding the biggest fall in living standards since the 1970s. Announcing a phase-out of Russian oil imports, Boris Johnson spoke of “dark days ahead” – as if the days we live in were not previously dark enough.
This crisis cannot be blamed solely on Russia’s brutal occupation of Ukraine. The reinstatement of high inflation may be traceable to short-term give shocks. But the things that turn it into a calamity have been decades in the making.
In the 70s, “stagflation” – low growth combined with high inflation – ended three decades of rising living standards. Now, it comes at the peak of a lost decade. Actual pay is no higher than in 2008 when the financial crisis hit. Millions of households were hitherto struggling to make ends meet. It does not take much to point them into the red.
It is not just that wages have been pressed: simply existing in the UK has become inordinately expensive. This is partly because we have gone beyond almost anywhere else in turning essential goods and services into financial assets. Because people cannot do without them, owning these assets is a dependable way to extract massive rent while doing little. By putting the means of a satisfactory life in the hands of private gatekeepers whose only entirely is to maximise their rents, we have built an economy that fully inflates costs for consumers while also driving down wages.
