Prices in the UK have been rising steeply since the end of 2021. In October 2022, the inflation rate including owner occupier’s housing costs (CPIH), reached 9.6%. This means that the prices of goods and services across the country were on average 9.6% higher than in October the year before. This is the highest CPIH rate since December 1980, according to historical estimates.
Average wages in the UK have risen at a slower pace than prices. In July to September 2022, regular wages rose by 5.7% year-on-year, and total pay, which includes bonuses, rose 6.0%. This means that pay has fallen in real terms: workers need a larger proportion of their wages to buy the same goods.
Many are feeling financial effects as a result. In late October and early November 2022, 93% of adults in Great Britain said the cost of living was an important issue facing the UK, and 91% said their cost of living had gone up compared with a year ago.
Not all workers have seen prices rise faster than their pay during the year. In some industries, such as professional and scientific or property, pay growth was above inflation before and during the coronavirus (COVID-19) pandemic, and continued to exceed inflation in early 2022.
However, as inflation continued increasing steeply during 2022, regular wage growth fell behind inflation in all industries except professional and scientific (which includes businesses covering areas such as legal services, management, engineering and scientific research).
In other industries, such as public administration and education, pay growth has been below inflation since the second half of 2021.
Workers within each industry have also been affected differently depending on their wages. Those on lower pay will feel the impact of wage growth falling behind inflation and the resulting increased cost of living more acutely.
You can use our calculator to see how inflation has affected the value of your pay compared with last year, and what increase would be necessary for your wages to keep pace with inflation.
Regular wage growth in the professional and scientific industry has sat above inflation since November 2018. It remained so during the coronavirus pandemic and has kept pace with prices as they have risen over the last year.
Since May to July 2022, the professional and scientific industry has been the only one where regular wage growth (excluding bonuses) has remained higher than inflation; sitting at 10.1% in July to September 2022. This means average wages in the industry in this period were 10.1% higher than the same period the previous year.
Wage growth in other industries, such as property, information and communication, retail, and finance, also sat largely above inflation in recent years. However, between January to March 2022 and April to June 2022, rising inflation outpaced regular wage growth in all of these industries.
Professional and scientific is the only industry where wage growth has remained above inflation throughout 2022
Average weekly earnings (regular pay) annual growth rate for strongest growth industries, not seasonally adjusted, and inflation (CPIH), three-monthly averages, industries ordered by July to September 2022 wage growth, January to March 2015 to July to September 2022, UK
- The strongest growth industries are defined as those were pay growth was generally higher than inflation before and during the COVID-19 pandemic, up to at least the three months February 2022.
Although regular pay growth in finance fell below inflation in January to March 2022, higher bonuses have compensated. Total pay (which includes bonus pay) grew faster than prices until the three months to June 2022. In the three months to September 2022, it sat below inflation, at 6.3%.
The finance industry has the highest average regular pay (£1,147 per week in the three months to September 2022). It also offers high bonuses, which represent a large proportion of total pay, especially during "bonus season". This is typically between December and March.
As inflation started rising steeply at the end of 2021, total pay growth in finance also rose steeply to 15.9% in October to December 2021. This is the highest rate since the cap on bankers’ bonuses was introduced in the UK in 2013.
Growth in total pay (including bonuses) in finance stayed above rising prices until Summer 2022
Average weekly earnings (total pay) annual growth rates in the finance industry, not seasonally adjusted, and inflation (CPIH), three-monthly averages, January to March 2015 to July to September 2022, UK
The property and professional and scientific industries also saw a larger-than-usual rise in total pay in March 2022, when bonuses reached their highest levels on record, at £261 and £241 on average per week, respectively.
In the professional and scientific industry, this was the largest bonus on record by a large margin (£102). Both regular pay and bonuses have been compensating for rising inflation in this industry.
UK job vacancies reached a record high of 1.3 million in March to May 2022. In August to October 2022, there were 54% more vacancies than pre-coronavirus (COVID-19) pandemic (January to March 2020).
Worker shortages (manifested in high numbers of vacancies) can lead to wage increases, as employers compete to attract or keep workers. This could partly explain high wage growth in some industries in early 2022.
Four of the five industries where wage growth stayed above inflation in early 2022 (professional and scientific, information and communication, retail and finance), also had vacancy rates in June 2022 that were 1.5 or more percentage points higher than a year before. The vacancy rate is the percentage of jobs which remain vacant. This can be seen in the following chart.
Most industries with increased vacancy rates saw higher wage growth in June 2022
Average weekly earnings (regular pay) annual growth rate, not seasonally adjusted, and year on year change in vacancy rate (percentage points), seasonally adjusted, three-monthly averages, April to June 2022, UK
Hospitality also saw a big increase in both the vacancy rate and wages in the year to June 2022. The hospitality workforce was highly disrupted by the coronavirus pandemic and had a relatively high number of jobs furloughed. Therefore, interpreting recent wage growth data in this industry is particularly complicated, as we will explore further.
However, there is some evidence that vacancies could be pushing up wages. Around a fifth of hospitality businesses reported increasing wages in Summer 2022, 23% in May and June and 20% in June and July. This is according to the Office for National Statistics’ (ONS’) Business Insights and Conditions Survey (BICS) as published in our Business insights and impact on the UK economy: 11 August 2022 bulletin and Business insights and impact on the UK economy: 25 August 2022 bulletin.
Regular pay growth in the public sector was 2.2% in July to September 2022, while in the private sector it was 6.6%. This is both the largest private sector pay growth and the largest gap between public and private pay growth on record (since January 2000), excluding the height of the coronavirus (COVID-19) pandemic.
Industries with more public sector jobs, such as education and public administration, have seen some of the lowest pay growth in 2022, along with arts and recreation, mining, and power and water.
The health industry has seen higher pay growth than education and public administration throughout 2022, although it has remained below inflation. In July to September 2022, regular wage growth in the health industry was 4.7%, compared with 2.9% in education and 3.6% in public administration.
Industries that have seen the largest pay growth in recent months – professional and scientific, property, information and communication, retail and finance – are mainly in the private sector.
Workers in the arts and entertainment industry have experienced the largest falls in wages in 2022. Although part of this fall can be explained by base effects, this is particularly problematic as a fifth (21%) of workers in the arts and entertainment industry are on low pay (earning less than two-thirds of the national median hourly earnings). Public administration and education have far fewer workers on low pay, at 1% and 5%, respectively.
Industries with a high percentage of public sector workers were among those with below-average pay growth in summer 2022
Average weekly earnings (regular pay) annual growth rate for weakest growth industries, not seasonally adjusted, and inflation (CPIH), three-monthly averages, industries ordered by July to September 2022 wage growth, January to March 2015 to July to September 2022, UK
- The weakest growth industries are defined as those that had that had the lowest pay growth during 2022, as inflation was rising steeply.
Wage data in this article come from the Office for National Statistics (ONS) Monthly Wages and Salaries Survey, which is published in the Average weekly earnings in Great Britain: November 2022 bulletin.
Wages are expressed in nominal terms (not adjusted for inflation). Annual wage growth is calculated using three-monthly averages of monthly average weekly earnings (AWE). Three-monthly averages improve the reliability of the data, which is volatile at industry level, and are also taken in the headline figures in the ONS Average weekly earnings in Great Britain bulletin.
Inflation data in this article come from the ONS Consumer price inflation, UK: October 2022 bulletin.
Inflation is measured using the Consumer Prices Index including owner-occupiers' housing costs (CPIH), rather than the Consumer Prices Index (CPI), because it is the most comprehensive measure of inflation and incorporates costs associated with owning, maintaining and living in one's own home, which are significant costs for many households.
Inflation rate figures are calculated using a three-monthly average index CPIH. This is done for comparability with the average weekly earnings figures we present. CPIH figures in this article are therefore slightly different to the ones published in the ONS Consumer Price Inflation bulletin, which are calculated using monthly data.
Vacancy data in this article come from the ONS Vacancy Survey. Employee jobs data come from the ONS Workforce Jobs (WFJ) dataset, which estimates employee job numbers from employer surveys. The latest release of workforce jobs includes data up to June 2022. The vacancies and employee jobs data in this article are published in the ONS Vacancies and jobs in the UK bulletin.
The vacancy rate in this article is defined as the number of vacancies as a percentage of employee jobs plus vacancies. This definition is different from the vacancy rates published in the monthly Vacancies and jobs in the UK bulletin.
All data used in the article are three-month averages, apart from workforce jobs employee numbers, which are collected every three months.
The industry breakdown used for this analysis is based on the UK Standard Industrial Classification (SIC).
The following list contains the full SIC names followed by their corresponding shortened industry names used throughout the article:
- Mining and Quarrying – Mining
- Manufacturing – Manufacturing
- Electricity, Water and Gas – Power and water
- Construction – Construction
- Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles – Retail
- Transportation and Storage – Transport and storage
- Accommodation and Food Service Activities – Hospitality
- Information and Communication – Information and communication
- Financial and Insurance Activities – Finance
- Real Estate Activities – Property
- Professional, Scientific and Technical Activities – Professional and scientific
- Administrative and Support Service Activities – Administration
- Public admin and Defence; Compulsory Social Security – Public administration
- Education – Education
- Human Health and Social Work Activities – Health
- Arts, Entertainment and Recreation – Arts and recreation
- Other Service Activities – Other services