Cost-of-living divide: Biggest pay rises go to the wealthiest 1%

Cost-of-living divide: Biggest pay rises go to the wealthiest 1% with City bonuses surging as wages in other sectors lag far behind inflation

  • Analysis of ONS data shows top 1% of earners saw the biggest rises since Covid
  • Financial services bonuses have been partly driving the overall wage growth
  • Workers in some sectors are faring far worse compared to surging inflation 

The difference in fortunes between the wealthiest and the lowest earners during the cost-of-living crisis has been laid bare in new figures.

Analysis of official data shows that since the peak of the Covid pandemic the top 1 per cent of employees have seen incomes rise more than 16 per cent.

Meanwhile, the increase for the bottom 10 per cent since July 2020 has been barely 10 per cent.  

The gap underlines how workers in some sectors have been able to stay ahead of surging inflation by benefiting from a scramble to recruit and retain staff – while others are suffering from a huge squeeze.

Pay per month, seasonally adjusted, UK, three months

Details from the ONS revealed that in the three months to April the rate of increase for finance and business services workers was 10.6 per cent – well above inflation

The PAYE data shows that in May median monthly pay increased by 5.4 per cent compared with the previous year. But in the wholesale and retail sector it was 7.8 per cent while the arts and entertainment sector earnings effectively flatlined with just 0.1 per cent growth.

The Office for National Statistics has pointed to bumper bonuses in financial services as one reason for the divide. 

Figures this week showed that taking CPI inflation into account regular wages excluding bonuses plunged by the annual equivalent of 4.5 per cent in April – the worst fall since records began in January 2001. 

Even including bonuses there was a 3.7 per cent tumble in real earnings. 

However, the details from the ONS reveal that in the three months to April the rate of increase for finance and business services workers was 10.6 per cent – well above inflation.

In manufacturing the equivalent figure was 4.3 per cent, and in the public sector as a whole – which did better at the peak of the Covid crisis – it was just 1.5 per cent.  

The ONS said: ‘Total pay has seen strong bonus payments since August 2021, and in particular in March 2022 when the non-seasonally adjusted bonus payment was extremely high. 

‘As a result, the March 2022 single-month growth was very strong and continues to heavily affect the three-month growth rate. The largest bonus payments are in the finance and business services sector but are high across several sectors for April 2022.’

Analysis of the most up-to-date figures for PAYE employees reveals that since July 2020, the top 1 per cent have seen their earnings grow by 16 per cent – from £12,370 a month to £14,376.

Incomes for the top 5 per cent have risen nearly 13 per cent to £6,753.  

Figures this week showed that taking CPI inflation into account regular wages excluding bonuses plunged by the annual equivalent of 4.5 per cent in April – the worst fall since records began in January 2001

The figure for the bottom half of the income distribution is just under 13 per cent, and for the bottom 10 percent it is 10 per cent – to £688 a month.

The PAYE data shows that in May median monthly pay increased by 5.4 per cent compared with the previous year. 

But in the wholesale and retail sector it was 7.8 per cent while the arts and entertainment sector earnings effectively flatlined with just 0.1 per cent growth. 

The ONS figures this week showed 1.3million unfilled jobs in the three months to May, while numbers on payrolls were up 90,000 from April to a new high of 29.6million last month. 

Meanwhile, unemployment dropped to 3.8 per cent in the quarter to April, and inactivity nudged down – although it is still above pre-pandemic levels.

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