The spending power of UK households fell the most in at least 21 years as wage increases were eaten up by the fastest inflation in decades, official figures showed.
hen adjusted for prices, average earnings excluding bonuses were 3.4% lower in April than a year earlier, the biggest drop since modern records began in 2001, Office for National Statistics said Tuesday. The average decline in the three months through April was 2.2%, the most since 2011.
The figures show how pay packets for most workers are failing to benefit from the tightest labor market in living memory. Earnings rose 4.1% in April, around half the rate of inflation. Wages including bonuses grew at a faster pace but the rewards are uneven.
The squeeze is piling pressure on Prime Minister Boris Johnson and creating a major challenge for Bank of England Governor Andrew Bailey as policy makers try to curb of inflation without pushing the economy into recession.
Wages are rising too slowly for workers but are growing too quickly for companies, which are raising prices to protect their profit margins. The BOE is expected to deliver an unprecedented fifth successive rate hike on Thursday to avert a wage-price spiral, and money markets imply many more are on the way.
For the government, calls for further help are mounting. Tax rises are adding to the squeeze and ministers admit that a Â£15 billion aid package announced last month will only go so far to help.
Unemployment rose unexpectedly in the three months through April to 3.8% from 3.7% the month before as more people returned to work. There were 41,000 more people without work but looking for a job, the first increase since the three months to December 2020.