AVERAGE earnings in the UK have grown for the fourth month in a row, fresh data shows.
Weekly earnings, excluding bonuses, rose by 5.9% between November 2024 and January 2025, compared with the same period a year earlier.
This is unchanged from the previous three months, according to Office for National Statistics (ONS) figures.
But when inflation is taken into account, wages actually rose by 3.2%.
It follows a rise in inflation in January which was well above the Bank of England‘s target.
Official figures showed inflation rose by 3% in the 12 months to January – above the target of 2%.
If wages don’t keep up with rising prices, it means people are worse off in real terms.
Commenting on today’s figures, ONS director of economic statistics Liz McKeown said: “Overall pay growth remains relatively strong, with pay growth high in both the public and private sectors, despite the latter slowing slightly in the latest period.”
But with a series of tax hikes set to come into effect in a matter of weeks, things could be looking more tricky soon for household budgets.
From April 1, businesses will be paying higher National Insurance contributions for their employees.
That could mean higher costs passed on to consumers, as well as businesses cutting jobs.
A recent survey of employers found companies are planning to cut jobs or recruit fewer people ahead of the increase to National Insurance payments for employers and wages.
[bc_video account_id=”5067014667001″ application_id=”” aspect_ratio=”16:9″ autoplay=”” caption=”What is inflation and what does it mean for me?” embed=”in-page” experience_id=”” height=”100%” language_detection=”” max_height=”360px” max_width=”640px” min_width=”0px” mute=”” padding_top=”56%” picture_in_picture=”” player_id=”default” playlist_id=”” playsinline=”” sizing=”responsive” video_id=”6349208124112″ video_ids=”” width=”640px”]Businesses questioned by the Chartered Institute of Personnel and Development (CIPD) said they would raise their prices to cover increasing employment costs.
What it means for your money
A growth in wages is good news for workers as it means they’re getting more in their pay packets each month.
It’s also good news for the Government as it means more money is pumped into the economy.
This leads to a rise in Gross Domestic Product (GDP) – a sign the economy is healthy and doing well.
As a result, more money can then be spent on public services such as schools, hospitals and libraries.
Taxes may also fall as the Government doesn’t need to stump up as much money.
But while rising wages are good for workers, they can also push up inflation.
The Bank of England tries to keep inflation down below its target of 2%.
When inflation is too high, it will keep interest rates high too – something that will impact borrowers and mortgage holders.
It’s expected that inflation will peak at 3.7% this year, which the Bank of England says is due to increases in the cost of energy, water and bus fares.
[authenticated-scripts src=”%3Cscript%20class%3D%22palin-poll%22%20src%3D%22https%3A%2F%2Fwww.thesun.co.uk%2Fpollingwidgets%2Fv3%2Fwidget.js%3Fquestion_id%3D109679%26game%3Dpolling%22%3E%3C%2Fscript%3E” type=”embedded” width=”100″ /]Alice Haine, a personal finance analyst at Bestinvest by Evelyn Partners, said: “When you consider the inflationary impact the chancellor‘s impending tax measures will have for businesses, with a number of major companies already announcing plans to pass on rising costs to consumers, the outlook from here for household budgets is far from rosy.”
“Add in the hit from rising household bills, with energy, water and council tax charges all set to go up from April 1 along with rising concerns about job and income security and households are likely to be feeling very worried once again.
“Some businesses are already scaling back on pay rises and hiring in 2025 as they batten down the hatches in preparation for the barrage of hits coming in April from the increased rate of employer National Insurance and lowering of the wage threshold at which it applies, along with hikes to the minimum wage and business rates.”
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Unemployment flatlines
Meanwhile, the new ONS figures also showed the rate of unemployment remained unchanged at 4.4% in the three months to January.
However, this is above estimates of a year ago.
The estimated number of vacancies in between December 2024 to February 2025 was 816,000.
The ONS’s Liz McKeown said: “The wider labour market picture is relatively unchanged, with the number of employees on payroll broadly flat in the latest period and with little growth seen over much of the last year.
“Unemployment, as measured by the Labour Force Survey, and the Claimant Count have both increased slightly in the latest periods, though caution continues to be advised with the survey estimates.
“Initial estimates show that the number of vacancies is little changed on the previous quarter, remaining just above pre-pandemic levels.”
Of course, there are fears this could rise should businesses begin cutting jobs.