Pay cut for millions as real wages fall by 2.8% – what it means for your money? | The Sun

MILLIONS of workers are facing a cut to pay in real terms as inflation outpaces wage growth.

New figures released today by the Office for National Statistics show that wages in "real terms" fell by 2.8% from May to July, meaning less money in peoples' pockets.

That's compared to 3% last month, the ONS said.

A real terms pay cut means even if wages are going up, if they don't match the rate of inflation, which is currently 10.1%, people will effectively be getting less in their pay packets.

When inflation goes up it means the price of everyday items, fuel and bills go up, which means budgets are squeezed.

Inflation hit a 40-year high in July, up from 9.4% the previous month.

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The latest figures from the ONS show average workers' total pay excluding bonuses went up by 5.2% and for those with bonuses it went up by 5.5%.

Average regular pay grew by 6% in the private sector, while in retail and the hotels and restaurant sector wages went up by 7%.

Meanwhile, wages in the finance and business services sector grew at 5.9% and the construction sector at 5.4%.

The average weekly earnings for regular pay was £571 in July 2022, according to the statistics.

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This showed a steady increase in wages over time, the ONS said.

In good news, the number of UK workers on payrolls rose by 71,000 between July and August to 29.7million.

That means the unemployment rate for May to July decreased by 0.2% to 3.6%, the lowest rate since 1974.

The number of jobs available on the market in June to August was 1,266,000.

What does it mean for my money?

Alice Haines, personal finance analyst at Bestinvest, an online investment platform, said the latest real terms wages figures meant peoples' spending power was "severely compromised".

"With inflation expected to edge higher on Wednesday, when the ONS releases the latest reading, how far wages can go in the daily lives of workers will be tested once again," she said.

"However, fears of a wage-price spiral might ease off if the chatter around an impending recession at the end of the year rings true.

"GDP might have risen slightly in July, up 0.2% compared to contraction of 0.6% in June, but that did little to offset the flattening economic growth in the three months to July as the fallout from the war in Ukraine and rising borrowing costs took its toll on the economy."

Alice Liz Truss' plan to freeze energy bills for millions of households across the UK for two years could lead to a "much milder recession" than anticipated.

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