One chart showing the slow rise in UK wage growth over the last 5 years

The UK jobs market is recovering, but UK wage levels have yet to catch up.

by Elizabeth Anderson
Last Updated: 12 Aug 2014

There are now record numbers of people in work, but the latest data from the Office for National Statistics suggests the economic recovery has yet to reach consumer's pockets.

As the chart below shows, wages have consistently risen below the rate of inflation for the last few years.

Earnings rose just 0.3% in the three months to May, while the inflation rate was 1.5% in May.

The ONS said earnings continued to be affected by a sharp drop in bonuses compared with a year ago, when many employers delayed payments until April to take advantage of a cut in the top tax rate.

But there was more positive data about the UK labour market. The proportion of people in work hit 71.3% in the three months to May, up 0.5 points on the previous quarter, the ONS said. That figure was previously recorded in 2004-05 and the rate has never been higher since records began in 1971.

Overall, the number of people in work grew by 254,000 in the quarter to 30.64m and most of the jobs were in full-time positions.

Meanwhile the unemployment rate fell to 6.5% of the workforce, the lowest since December 2008, down 0.4 points on the previous quarter and down from 7.8% a year earlier. There are now 2.12 million people out of work, down 121,000.

The strength of the jobs recovery means many analysts are now questioning whether a rise in interest rates could soon follow. Some have speculated that interest rates could rise from their historic low of 0.5% by the end of the year, although Britain's debt levels means the economy is still vulnerable to a sudden jump in rates.

Bank of England Governor Mark Carney recently stressed that increases in the borrowing rate would be gradual, but that interest rates of 2.5% could be introduced over the next three years. That could increase repayments on an average mortgage by about £2,400 a year, or £200 a month.

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