Week 16, 2013: Wages vs. Prices

Summary: The UK Office for National Statistics reported that there was record low growth in average weekly earnings between February and the same month the previous year. This is the culmination of a trend that has been with us since the financial crisis.

What does the chart show? The blue line represents the percentage change in average weekly earnings (excluding bonuses) compared to the same month the previous year. The red line shows the percentage change in the CPI measure of inflation, also compared to the same month the previous year.

Why is the chart interesting? If prices are rising at a faster rate than wages, it means that in real terms, we are getting relatively poorer. This has been a feature of the UK economy since June 2008, and peaked in September 2011 when the CPI rate of inflation reached 5.2% while wages were only growing by 1.8%. Last summer it looked like the two might finally cross, but since then inflation has edged up while wage growth has fallen away dramatically. In February, the annual percentage growth of average weekly earnings was just 0.6% (compared to price increases of 2.8%), the lowest point since records began in 2001. We've been getting poorer in real terms for almost 5 years now, and unfortunately that doesn't look like changing any time soon.