Average weekly earnings in Great Britain: May 2021

Other commentary from the latest labour market data can be found on the following pages:

• Labour market overview: May 2021

• Employment in the UK: May 2021

• Vacancies and jobs in the UK: May 2021

• Earnings and employment from Pay As You Earn Real Time Information, UK: May 2021

• Annual growth in average employee pay continued - driven in part by compositional effects of a fall in the number and proportion of lower-paid employee jobs.

• Growth in average total pay (including bonuses) among employees for the three months January to March 2021 was 4.0%, and growth in regular pay (excluding bonuses) was 4.6%.

• Current average pay growth rates are being affected upwards by a fall in the number and proportion of lower-paid jobs compared with before the coronavirus (COVID-19) pandemic; it is estimated the net impact of recent job losses is to increase the estimate of average pay by approximately 1.7% - suggesting an underlying wage growth of around 2.5% for total pay and around 3.0% for regular pay.

• Average total pay growth for the public sector was 5.6%, whereas for the private sector was 3.7%; the large increase in public sector pay growth was mainly accounted for by a strong growth in the health and social work industry (5.8%).

• All sectors saw positive pay growth in January to March 2021, however, within these sectors some industry groups have seen negative pay growth, for example, accommodation and food service activities (negative 7.0%).

The rate of annual pay growth was 4.0% for total pay and 4.6% for regular pay in January to March 2021. Average pay growth rates have been affected upwards by a fall in the number and proportion of lower-paid jobs compared with before the coronavirus (COVID-19) pandemic (discussed in more detail in Measuring the data). It is estimated the net impact of recent job losses is to increase the estimate of average pay by approximately 1.7% – suggesting an underlying wage growth of around 2.5% for total pay and around 3.0% for regular pay.

Bonus payments in February and March were slightly down on last year causing the slower total pay growth rate compared with regular pay growth.

In real terms (adjusted for inflation), total pay is now growing at a faster rate than inflation, at positive 3.1%, and regular pay at positive 3.6%. Average real pay growth rates are also affected by the compositional effect suggesting an underlying wage growth of around 1.5% for real total pay and around 2.0% for real regular pay.

Compositional effect

This strong pay growth has been affected by a changing composition of employee jobs, which naturally increases average pay and needs to be borne in mind when interpreting average pay growth - this is explained further in Measuring the data and shown in Figure 2.

Aggregate pay and furlough

This underlying average pay growth is also supported by the recent growth of aggregate earnings (total amount paid across all employees) from Pay As You Earn (PAYE) where in March 2021 aggregated pay increased by 2.2% compared with March 2020.

In addition and discussed in previous releases, the pattern of pay growth is affected by the proportion of employees who are furloughed, and the extent to which employees have topped up payments received for those employees under the Coronavirus Job Retention Scheme (CJRS). We have published estimates indicating that 19.0% of the workforce were on partial or full furlough between 8 and 21 March 2021.

Sector and industry

Average total pay growth for the public sector was 5.6% in January to March 2021, whereas for the private sector was 3.7%. The large increase in public sector pay growth was mainly accounted for by a strong growth in the health and social work industry (5.8%).

Over the past year all sectors saw positive growth, but within these sectors some industry groups have seen negative pay growth, for example, accommodation and food service activities (negative 7.0%).

Average Weekly Earnings

Average Weekly Earnings (AWE) is the lead monthly measure of average weekly earnings per employee. It is calculated using information based on the Monthly Wages and Salaries Survey (MWSS), which samples around 9,000 employers in Great Britain.

The estimates are not just a measure of pay rises as they do not, for example, adjust for changes in the proportion of the workforce who work full-time or part-time or other compositional changes within the workforce. The estimates do not include earnings of self-employed people.

Estimates are available for both total pay (which includes bonus payments) and regular pay (which excludes bonuses). Estimates are available in both nominal terms (not adjusted for inflation) and real terms (adjusted for inflation).

Estimates of pay growth are also published using HM Revenue and Customs' (HMRC's) data in Earnings and employment from Pay As You Earn Real Time Information, UK: May 2021.

The HMRC estimates are presented in median pay-terms, but they also include mean pay as does AWE. There are some differences between the sources, most notably that the HMRC estimates include any redundancy payments that are made through payroll. Further detail is provided in a Comparison of labour market sources, published 11 December 2020.

Bonus

A bonus is a form of reward or recognition granted by an employer. When an employee receives a bonus payment, there is no expectation or assumption that the bonus will be used to cover any specific expense. The value and timing of a bonus payment can be at the discretion of the employer or stipulated in workplace agreements.

Consumer Prices Index including owner occupiers' housing costs

As of 21 March 2017, the Consumer Prices Index including owner occupiers' housing costs (CPIH) became our lead measure of inflation. It is our most comprehensive measure of UK consumer price inflation.

Monthly Wages and Salaries Survey

The Monthly Wages and Salaries Survey (MWSS) is a survey through which we collect information on wages and salaries. It is distributed monthly to around 9,000 employers covering around 12.8 million employees.

A more detailed glossary is available.

The survey response rate was 78.0%, only slightly lower than the 83.0% target in more typical months.

Compositional effect

The change in pay growth has been affected by a changing composition of employee jobs, where we have seen a fall in the number and proportion of lower-paid employee jobs. This changing composition naturally increases average pay and needs to be borne in mind when interpreting average pay growth. Changes in the profile of employee jobs in the economy will affect average pay growth; a decrease in employee numbers in jobs that have lower pay can have an upward effect on average pay, and the other way around.

Latest data show the compositional effect is approximately 2.7% (Figure 2), compared with approximately 1.0% before the pandemic affected the workforce. To take into account the compositional effect present before the pandemic, this 1.0% is subtracted from the latest compositional effect of 2.7% to show that the net impact of recent job losses is to increase the estimate of average pay by approximately 1.7%. This suggests an underlying wage growth of around 2.5% for total pay and around 3.0% for regular pay.

As such we can consider the compositional effects from three angles:

• Labour Force Survey data highlight a decrease in the number of part-time jobs (which have lower pay) and jobs in lower-paying sectors

• changing distribution of jobs between industries, provided in Dataset Earn02, impacting average pay growth by 0.6%

• HM Revenue and Customs (HMRC) Earnings and employment from Pay As You Earn Real Time Information, UK: November 2020 inflows and outflows data indicate a fall in new entrants to the labour market, who are lower-paid than average

These three compositional analyses are not mutually exclusive, and do not necessarily consider all the compositional effects that impact average pay, but they do indicate that a proportion of estimated pay growth is because of recent changes in employee job profiles. We plan to conduct more detailed analysis on the impact of compositional factors.

More information on the compositional effect the data is available in our previous release.

Sampling variability for average weekly earnings single month growth rates in percentage points is available in our previous release.

For more information on how labour market data sources are affected by the coronavirus (COVID-19) pandemic, see the article published on 6 May 2020, which details some of the challenges that we have faced in producing estimates at this time.

An article published 11 December 2020 compares our labour market data sources and discusses some of the main differences.

End of EU exit transition period

As the UK enters into a new Trade and Co-operation Agreement with the EU, the UK statistical system will continue to produce and publish our wide range of economic and social statistics and analysis. We are committed to continued alignment with the highest international statistical standards, enabling comparability both over time and internationally, and ensuring the general public, statistical users and decision makers have the data they need to be informed.

As the shape of the UK's future statistical relationship with the EU becomes clearer over the coming period, the ONS is making preparations to assume responsibilities that as part of our membership of the EU, and during the transition period, were delegated to the statistical office of the EU, Eurostat. This includes responsibilities relating to international comparability of economic statistics, deciding what international statistical guidance to apply in the UK context and to provide further scrutiny of our statistics and sector classification decisions.

In applying international statistical standards and best practice to UK economic statistics, we will draw on the technical advice of experts in the UK and internationally, and our work will be underpinned by the UK's well-established and robust framework for independent official statistics, set out in the Statistics and Registration Service Act 2007. Further information on our proposals will be made available later this year.

We will continue to produce our labour market statistics in line with the UK Statistics Authority's Code of Practice for Statistics and in accordance with International Labour Organization (ILO) definitions and agreed international statistical guidance.

More information on measuring the data is available in our previous release.

Information on the strengths and limitations of this bulletin is available in our previous release and in A guide to labour market statistics and A guide to sources of data on earnings and income.