Wage rises vs inflation: It's official - we're getting richer

The Office for National Statistics published figures this morning showing wages are rising faster than inflation for the first time in six years. It's exciting stuff.

by Emma Haslett
Last Updated: 02 Jun 2014

And lo, it came to pass: after weeks of speculation, this morning the Office for National Statistics published figures showing wage growth is higher than inflation for the first time in nearly six years. This is the holy grail of announcements. Finally, people are getting richer.

Weekly wages including bonuses rose by 1.7% in the year to February, up from 1.4% in January - versus the Consumer Price Index, which fell to 1.6% earlier this week. The only fly in the ointment is that if you strip out bonus payments, wages only rose 1.4%. Oh well. You can’t please everyone.

Before we crack out the party poppers, though, it’s worth considering the fact that the reason we are now more well off is not because pay rises are any better than they have been (ok, a bit better) - but because inflation is falling, fast. If you look at it in real terms, wages have actually declined by 10% since 2008, says Capital Economics. And the Office for Budget Responsibility reckons incomes won’t hit the same levels they were at in 2009-10 until 2018. So consumers won’t be dusting off those credit cards yet.

Still, it shows the recovery is going in the right direction, which is important (particularly to George Osborne, the year before an election). Today the ONS also published figures showing unemployment dropped to 6.9% in the three months to February - below the magic 7% level at which Bank of England governor Mark Carney had originally planned to raise interest rates, before he realised recovery was happening much faster than he thought. So we’re on the right track - which is surely worth celebrating. And here's the chart to prove it:

Find this article useful?

Get more great articles like this in your inbox every lunchtime