Real wages ‘still in decline’

Consumers struggling with debt may find their situation gets even tougher due to the worsening of the inflation situation.

With the Consumer Prices Index (CPI) rate ending five months of falls with a small increase from 3.4 per cent to 3.5 per cent in March, the impact on those struggling to pay all their bills while still managing their monthly repayments may be to make this considerably harder.

Commenting on the way the situation will hit people in the pocket, general secretary of the Trades Union Congress Brendan Barber said: "Inflation is not falling as fast as many hoped. With pay growth also weak, families are getting poorer every month.

"Wages have been falling since mid 2010 and the government's own forecasters are predicting a three year earnings drop."

Mr Barber went on to attack government policies, claiming lower tax credits have taken more money away from those on low incomes than they have gained through raised personal allowances.

The decline in wages Mr Barber spoke of has been manifested in settlements that have remained below the CPI rate even as this has fallen since its September 2011 peak of 5.2 per cent.

This downward trend has been demonstrated again today (April18th) as the latest employment data from the Office for National Statistics has been published.

It revealed total pay in the three months to February 2012 was up by just 1.1 per cent (including bonuses) and 1.6 per cent excluding bonuses. The latter figure was unchanged since January, but the former was down by 0.2 per cent and both demonstrate that the rate of pay is still rising by well below the rate of pay growth.

By contrast, settlements in 2011 tended to be higher, often over two per cent, suggesting that the fall in inflation is reducing wage push pressure in the labour market to the detriment of employee pay packets.

One brighter note among the employment figures was that the three months to February brought a fall of 35,000 in the jobless numbers, the first quarterly unemployment fall since May 2011.

By James Francis