Stark divide in public and private sector pay, as job vacancies fall

interactive investor comments on ONS Labour Market figures.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Wage growth remains above the levels of yesteryear, up 5.1% with bonuses included and 4.7% excluding bonuses in the three months to June 2022. The latest figures further indicate a stark divide in the economy, with pay packets in the UK private sector growing more than three times as fast as public sector workers’ renumeration over the period (5.9% versus 1.8%). This disparity could result from employers in the private sector offering more lucrative golden hellos and stronger bonuses than those offered in the public sector to attract and retain talent in one of the most competitive job market in generations.

“Many companies are increasingly struggling to keep their prices low when the cost of labour is on the up. High inflation means the buying power of workers' take-home pay has been shrinking. For many workers, their pay packet is not stretching wide enough to meet the escalating cost of seemingly everything from food and energy to petrol. If you exclude bonuses, pay in real terms is falling at its fastest rate since records began in 2001, down 3% - although the figures are distorted by employees on furlough over the same period last year.”

Job vacancies

Myron Jobson says: “While the headline rates of unemployment and of people neither working nor looking for a job were little changed, some heat has started to come off the red-hot job market amid fears of a looming recession. The number of job vacancies in May to July 2022 fell by almost 20,000 from the previous quarter, marking the first quarterly fall since June to August 2020. However, jobseekers still are holding all the cards as employers desperately seek to attract and retain talent to take their business to the next level in what remains a tumultuous period for recruitment.

“It’s unclear how long it will remain a jobseeker’s market, given the Bank of England’s move to up borrowing costs to rein in ballooning inflation and the possibility of a recession appearing likely.”

Key points

• Growth in average total pay (including bonuses) was 5.1%, and growth in regular pay (excluding bonuses) was 4.7% among employees in April to June 2022.
• In real terms (adjusted for inflation), growth in total and regular pay fell on the year in April to June 2022 at 2.5% for total pay and 3.0% for regular pay; this was a record fall for regular pay.
• Average total pay growth for the private sector was 5.9% in April to June 2022, and 1.8% for the public sector.
• The number of job vacancies in May to July 2022 was 1.274 million; a decrease of 19,800 from the previous quarter and the first quarterly fall we have seen since June to August 2020. Since vacancies fell to an all-time low in April to June 2020, they have increased by 945,000 in a little over two years.