Are wages rising in the UK? ONS data shows how salaries have changed over past 10 years - and whether they’ve kept up with inflation

Prime Minister Boris Johnson came to blows with the BBC’s Andrew Marr in an interview on Sunday (3 October) over whether or not wages in the UK are rising.

The PM had claimed that the British economy was “bouncing back” in the wake of the coronavirus pandemic, which was reflected in an increase in earnings.

He also faced a grilling over the fuel crisis that has gripped the country recently, as well as a shortage of HGV drivers.

Mr Marr was praised by many for ‘calling out’ the Prime Minister’s claims on wage growth - but was he right?

NationalWorld has analysed the latest figures, and found wages have indeed been rising - but it is not as simple as Mr Johnson makes out.

Here’s everything you need to know.

What did the Prime Minister and Andrew Marr say?

Mr Johnson said: “What you’re also seeing is finally growth in wages after more than 10 years of flatlining.”

Mr Marr interjected, saying: “The Office for National Statistics, the ONS, your own body, in the last reporting period – the three months running through to July – says that wages are not keeping pace with inflation.

“You’re shaking your head but these are ONS, these are government figures.”

So who was right?

In this instance, the Prime Minister was closest to being right – but as is often the case with statistics, there is more to the story than he lets on.

Marr’s claim, that the ONS says wages are not keeping pace with inflation, is completely incorrect, however.

What figures does the ONS publish?

The ONS publishes an enormous amount of information on income and earnings.

Among them is average weekly earnings by employees, one of the main measures, which it estimates based on a survey of around 9,000 businesses employing 121,000 people.

The data, which is published monthly, is split into average total pay, which includes bonuses, and average regular pay, which excludes them.

What do the latest figures show?

The latest figures show average weekly earnings for employees stood at £542 in July, excluding bonuses.

But the ONS also publishes a real terms time series, in which wages are shown in 2015 prices, to allow for comparison against inflation.

That shows earnings of £542 in July 2021 would have been the equivalent of £488 in 2015.

That was 3.8% higher than in July 2020, when average earnings were at £470 in 2015 prices. That means wages have grown faster than inflation during the last year.

Earnings have fallen slightly since reaching a high of £491 in April. So year-on-year wage growth may be slowing – but it still outstrips inflation.

The ONS publication states “in real terms (adjusted for inflation), total pay and regular pay are now growing at a faster rate than inflation”.

You can explore the change in both total (including bonuses) and regular earnings over the last 10 years in the chart below.

What figures was Andrew Marr referring to?

NationalWorld asked the BBC to clarify what figures Mr Marr was referring to when he said inflation was rising quicker than wages.

It confirmed he had been referencing the average weekly pay figures NationalWorld has analysed, showing earnings of £488 in July.

It is yet to accept Mr Marr’s statement was incorrect.

Mr Marr’s team may have been confused by the fact that average weekly earnings in July had fallen compared to a couple of months ago.

That means the rate of annual growth has slowed – in April, the year-on-year real terms increase in earnings was 5.8%, compared to 3.8% in July.

But it is not right to say “wages are not keeping pace with inflation”.

The ONS told NationalWorld it does not publish any other figures covering the three-months to July, besides the year-on-year comparison, to which Mr Marr could have been referring.

The problem with the data

The most recent figures do not tell the whole story, and the ONS has been at pains to explain the limitations of its data following the coronavirus pandemic.

The average earnings data for July 2021 is the mean earnings – that is, everybody’s salaries added up and then divided by the number of salaries.

The preferred measure for earnings is usually the median, however, in which salaries are lined up from smallest to largest and the middle point is taken as the average.

The median irons out extremely low or high salaries which skew the data – when you take a mean, millionaires and other high earners drag the average up for everybody else beyond what the vast majority of people can relate to.

But median weekly earnings data is only available up until the end of 2020, so it is not as timely as the mean earnings data.

In its most recent update, the ONS cautions that the strong annual growth in earnings may reflect the fact that a year ago many people’s incomes had taken a hit because of the pandemic – so of course the picture looks better now.

But there is another problem – there has been a reduction in the number of people employed in low-paying jobs as a result of the pandemic.

That means people in higher-paid jobs are exerting an even stronger pull on the average than they were before, driving it up – but that doesn’t mean the majority of people have seen any increase in their earnings.

“This changing composition naturally increases average pay and needs to be borne in mind when interpreting average pay growth,” the latest ONS publication said.

In a blog post in May, ONS chief economist Grant Fitziner addressed the problems with the “distorted” figures.

“It would clearly be misleading to use such large and distorted annual growth rates as an indicator of the health of the UK economy,” he concluded.

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