Salary increases 'below inflation'

Wipe that smug look off your face - you may have had a pay rise, but you still can't afford to eat...

by
Last Updated: 06 Nov 2012

Over the last couple of years, pay rises have been few and far between, but if you’re one of the lucky ones who has managed to persuade your boss to give you one, you stop feeling smug now. Because, according to a new survey, the average British worker will actually see his or her salary drop during the next year – despite pay rises. According to figures from management consultancy Hay Group, the average salary will rise by just 2.3% – but, when you take inflation into account, it shows in real terms, it’s actually falling. And with the pound weaker than ever, we can’t even afford to go on holiday. Probably best to hold off on booking that trip to the Maldives…

The survey shows that with inflation expected to rise to 5.3% before the end of the year, the highest it’s been in 10 years, workers across the board are suffering from diminished spending power. It’s in sharp contrast to last decade, when the average salary grew by more than a third – or almost 10%, if you take inflation into account. Hay Group said the drop brings an end to 10 years of almost constant rises in living standards among UK employees.

Slightly better news is that the case isn’t the same for lower-paid workers, who have benefited from a 23% rise in their pay. Apparently, the National Minimum Wage has gone from £3.70 an hour in 2000, to £5.93 in 2010 – which works out at about 60%. Just as well, really – even in 2000, £3.70 an hour seemed a bit tight when it came to funding MT’s weekly forays into underage drinking.  

Even more depressing is that Hay Group expects salary increases to fall below inflation for the next four years or so. According to stats from the Office for National Statistics, inflation will sit around 3.23% over the next four years, peaking at 3.5% in 2014, while salary increases aren’t likely to rise above current levels.

When you’re scraping together pennies for the next loaf of bread, spare a thought for those at the top: with the witch-hunt for those perceived as earning ‘unreasonable’ bonuses continuing, media outrage at the salary levels of top earners may well get worse before it gets better. Then again, there are those who would point out that we should be pleased we’ve got a job at all…

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Salary increases 'below inflation'

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