Average weekly earnings in Great Britain: January 2022

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

• Labour market overview

• Employment in the UK

• Vacancies and jobs in the UK

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

• Growth in average total pay (including bonuses) was 4.2% and growth in regular pay (excluding bonuses) was 3.8% among employees in September to November 2021.

• Previous months' strong growth rates were affected upwards by base and compositional effects; these temporary factors have largely worked their way out of the latest growth rates, but a small amount of base effect for certain sectors may still be present.

• In July, we published a blog: How COVID-19 has impacted the Average Weekly Earnings data, which explains the complexities of interpreting earnings data.

• In real terms (adjusted for inflation), total and regular pay have shown minimal growth in September to November 2021, at 0.4% for total pay and 0.0% for regular pay; single-month growth in real average weekly earnings for November 2021 fell on the year for the first time since July 2020, at negative 0.9% for total pay and negative 1.0% for regular pay.

• Average total pay growth for the private sector was 4.5% in September to November 2021, while for the public sector, it was 2.6%; all sectors saw growth, with the finance and business services sector seeing the largest growth rate at 6.8%.

Average weekly earnings were estimated at £588 for total pay, and £550 for regular pay in November 2021. Figure 1 shows that average weekly earnings have steadily increased, with the exception of the early months of the coronavirus (COVID-19) pandemic.

The rate of annual pay growth for total pay was 4.2%, and the annual pay growth for regular pay was 3.8% in September to November 2021. Previous months' strong growth rates were affected upwards by base and compositional effects. These temporary factors have largely worked their way out of the latest growth rates, but a small amount of base effect for certain sectors may still be present.

In real terms (adjusted for inflation), total pay and regular pay for September to November 2021 are showing minimal growth at 0.4% and 0.0%, respectively. The increasing difference between real and nominal growth rates in recent months is because of increasing consumer price inflation (including owner occupiers' housing costs), which for the three months of September to November 2021 was an average of 3.8%.

Single-month growth in real average weekly earnings for November 2021 fell on the year for the first time since July 2020, at negative 0.9% for total pay and negative 1.0% for regular pay. This was previously seen in early 2020 because of the initial impact of the coronavirus pandemic and previous to this in 2017, when inflation increased, and then before that following the financial crisis in 2008, when pay growth decreased and inflation increased. Figure 3 shows a comparison of monthly real total and regular pay growth rates and monthly inflation.

Sector and industry

Average total pay growth for the private sector was 4.5% in September to November 2021, while for the public sector it was 2.6%. Since the end of 2019, the public sector has generally had stronger growth than the private sector. However, since April 2021, the year-on-year comparison with a low base period has meant the private sector now shows stronger growth.

In September to November 2021, the finance and business services sector had the largest growth rate (6.8%). Industries within this sector showed some of the largest growth rates among all industries, these being finance and insurance activities, professional, scientific and technical activities, and administrative and support service activities. Outside this sector, there were also strong growth rates in wholesale trade, except for motor vehicles and motorcycles, and information and communication.

Interpreting average earnings - base and compositional effects

Interpreting average earnings data over the last year has been difficult. In July, we published a blog: How COVID-19 has impacted the Average Weekly Earnings data, which explains the complexities of interpreting these data.

There were temporary factors that we refer to as base and compositional effects, which increased the headline growth rate in earnings above the underlying rate. These temporary factors have largely worked their way out of the latest growth rates, but a small amount of base effect for certain sectors may still be present.

The base effect refers to the comparison with the low base periods between April and August 2020, when earnings were mostly affected by the coronavirus pandemic and negative pay growth rates were seen. However, over the last two months, the base effect has been reducing. As with October 2021, the base effect in November 2021 is minimal for most sectors. Some base effect is still seen in the construction sector, mainly in September 2021, and a small amount across other sectors. Therefore, a small amount of inflation will be present for the September to November 2021 growth rates, but not to the degree we have previously seen.

The composition effect is where pay growth has been affected by a changing composition of employee jobs, which during the coronavirus pandemic had increased average pay, and needs to be considered when interpreting average pay growth, as explained in the Measuring the data section. The latest data show that there is no additional compositional effect given the two time periods we are comparing. Following the changes we have seen when looking at compositional effects over the past two years, we plan to develop our methods and conduct more detailed analysis to study the impact of compositional factors going forward.

As discussed in previous releases, the pattern of pay growth was also affected by the proportion of employees who were furloughed, and the extent to which employers have topped up payments received for those employees under the Coronavirus Job Retention Scheme (CJRS). The scheme ended at the end of September 2021, with 1.1 million people reported to be on the scheme at that time. The latest HM Revenue and Customs (HMRC) published CJRS statistics (16 December 2021) are available.

Average Weekly Earnings (AWE)

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. 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 bonus payments). 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) data in Earnings and employment from Pay As You Earn Real Time Information, UK.

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 79%; this was slightly lower than the 83% target in the months prior to the coronavirus (COVID-19) pandemic.

Compositional effect

Following the initial impact of the coronavirus pandemic, the change in pay growth was heavily affected by a changing composition of employee jobs, where we saw a fall in the number and proportion of lower-paid employee jobs. This changing composition naturally increased average pay and should be kept 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.

As such, when looking at the compositional effect following the initial impact of the coronavirus pandemic, so from the end of 2020 to mid-2021, 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: Average weekly earnings by sector

• 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 have an impact on average pay. Following the changes we have seen when looking at compositional effects over the past two years, we plan to develop our methods and conduct more detailed analysis to study the impact of compositional factors going forward.

More information on the compositional effect on the data is available in the April 2021 edition of this release.

Sampling variability for average weekly earnings single month growth rates in percentage points is also available in the April 2021 edition of this release.

For more information on how labour market data sources are affected by the coronavirus pandemic, see the article Coronavirus and the effects on UK labour market statistics, published 6 May 2020. This article details some of the challenges that we have faced in producing estimates at this time.

Our article Comparison of labour market data sources (published 11 December 2020) discusses some of the main differences between our data sources.

More information on measuring the data is available in the April 2021 edition of this release.

Information on the strengths and limitations of this bulletin is available in the April 2021 edition of this release, in A guide to labour market statistics, and in A guide to sources of data on earnings and income.