This means that take home pay is declining at record rates.
Is the situation the same in France and Germany?
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Between April and July 2022, real regular wages (when adjusted for inflation) in the UK declined at 3%, the fastest rate in 20 years. This means the previous record of 2.8%, which was only set in the previous quarter (March to May 2022), has already been broken.
According to data from the Office of National Statistics (ONS), between April to June 2022, total wages (average pay including bonuses) increased 5.1%, and regular pay (which excludes bonuses) increased 4.1%. This means that those with total weekly wages in the UK reached £611, while regular pay was £568.
However, given that inflation in the UK has reached a 40-year high of 9.4%, take home total pay declined 2.5% and regular wages fell 3%.
This decline comes on the back of a 2.8% drop between March and May 2022 – the previous record.
After taking inflation into account, average pay including bonuses fell by 2.5% in the year to April to June 2022.
— Office for National Statistics (ONS) (@ONS) August 16, 2022
Another sign that the UK labor market is cooling off is that the number of vacancies also declined.
Between May and July 2022, there were almost 20,000 fewer job openings than in the previous quarter. This is the first quarter decline in job openings since June to August 2020. However, vacancies still remained above one million, and were almost 500,000 higher than pre-COVID-19 levels.
ONS figures further showed that unemployment had increased slightly (by 0.1 percentage point) to 3.8%; the same as pre-COVID-19 figures.
Comparison with France and Germany
Like the UK, France has also seen a slight growth in the number of unemployed people.
According to Insee, in the second quarter of 2022, that the number increased 29,000 to 2.3 million – but the rate stayed stable at 7.4% and remained 0.8 percentage points below pre-COVID-19 levels.
Insee does not collect data the same way as the ONS, and it is yet to publish figures on wages or job openings for the second quarter of 2022.
However, inflation has risen to 6.1% in France in July. This is up 0.3% over the month. Could this hike affect take-home wages for French workers? Watch this space.
Like Insee, the German Federal Statistics Office is also yet to report real wages for the second quarter of 2022.
Interestingly, Germany seems to be better than its European neighbors at slowing getting inflation under control. Inflation in Germany declined from 7.9% in May to 7.5% in July 2022.
The Federal Statistics Office further reported that the employment rate in Germany was on the rise in June 2022. Employment rose 0.1% (or 27,000) between May and June 2022 – it was also up 1.3% on June 2021 figures.
Only time will tell if Germany and France will experience similar economic and labor market shocks as the UK. Stay tuned.
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