City workers get double-digit wage rises while lowest-paid see 1% increase
City workers received double-digit wage rises while people on the lowest incomes were paid annual increases of just 1% in the last year, according to a study that illustrates the ability of better-paid workers to protect themselves from the cost of living crisis.
The CEBR (Centre for Economics and Business Research) said workers in the banking and insurance sector had secured inflation-busting increases together with lawyers, accountants and professional services staff, mainly among those working in London’s financial district.
The economic consultancy described the figures as illustrating a “tale of two labour markets” where the “highest earners now enjoy annual pay growth of 10%, while lowest earners see just a 1% rise”.
Segregating monthly pay data into income groups, it said official data sources showed the bottom 10% had diverged from the 10% after a period of two years during the pandemic when they converged.
Nina Skero, the consultancy’s chief executive, said that while an increase in the national minimum wage will have raised the incomes of many low-paid workers, the data showed many others were not able to benefit.
A rise in the national minimum wage of 6.6% in April was likely to be offset by a fall in the number of hours worked by those on low pay.
Skero said the lowest 10% of workers were falling well behind the general inflation rate of 9.4% and would suffer more than other groups should the consumer prices index rise to 13%, as the Bank of England predicted in its latest forecasts.
She said: “Two prevalent yet opposing narratives have emerged. One focuses on the significant bargaining power held by employees as they take advantage of the tight labour market to negotiate record pay rises and generous bonuses.
“The other points to the decline in wages once inflation is taken into account, and provides abundant anecdotal evidence of people in work struggling to make ends meet.”
The central bank said last week that it was raising interest rates to 1.75% to combat the perception that inflation was becoming endemic, pushing workers to demand higher wages over the coming months.
However, the CEBR report and official figures indicate that the staff most able to drive up their wages are on the central bank’s doorstep in the Square Mile.
According to official figures that show a breakdown of workers’ wages by industry, staff in the finance and insurance sector were paid 10.6% more than a year ago, compared with 1.4% in the arts, leisure and entertainment industry.
Some industries that have suffered chronic staff shortages have raised weekly pay, including the construction and hospitality sectors, pushing average annual pay increases to 6.2%.
City law firms, accountancy businesses and firms aligned to the science and pharmaceutical sectors have also paid above-average wage rises to attract and retain staff.
The CEBR said that during the bonus season in February and March, City banking staff were paid salary and bonuses increases totalling almost 20% compared with the previous year.
“Earnings growth for the highest-paid 1% took off sharply at the start of 2022,” the report said.
“In the UK, a lot of the highest earners are concentrated in City of London jobs, usually in the finance, professional and technical industries. Mean pay in these industries has seen especially strong growth in 2022 with year-on-year increases in finance and insurance peaking at 19.8% in February and remaining well above 10.0% in the latest data.”
Professional, scientific and IT sector workers also saw wage growth peak in February at 12.7%.
“These wage spikes are reflective of a robust recent performance in the sector and of the fact that workers in these industries commonly receive performance-linked bonuses which represent a significant share of overall compensation,” the report added.
Official figures last month showed that after taking inflation into account, average pay including bonuses fell by 0.9% on the year to March to May 2022.
Excluding bonuses, pay adjusted for the Office for National Statistics’ preferred measure of inflation – the consumer prices index including housing (CPIH) – fell by 2.8%, the biggest fall since records began in 2001.
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