By Daniel Hunter
VocaLink Take Home Pay Index data from 2008 to 2012 released today (Wednesday) reveals a sustained decrease in spending power experienced by private sector workers over the past four years, as inflation rates remain high.
In a comparison of nominal average monthly incomes (actual take home pay figures) and real monthly income values (inflation-adjusted take home pay figures), the VocaLink Take Home Pay Index reveals that today’s private sector workers’ take home pay in real terms is an average of £89 per month less compared to 2008.
Despite a nominal average monthly take home pay increase of £92 compared to four years ago, the reality is a decrease in spending power when pay is adjusted according to the rate of inflation (as measured by the Consumer Price Index, as of November 2012).
In more recent trend analysis, the VocaLink Take Home Pay Index shows poor wage growth across the private sector. In the three months leading up to December, annual growth has fallen from 0.9% in the three months to November, down to just 0.4% in the three months to December. This marks the lowest rate of annual pay growth since March 2011.
Take home pay growth in the VocaLink Manufacturing Index falls back into negative territory over the three months to December, with annual growth standing at -0.8%. This comes as the latest Q3 2012 GDP estimate shows slower quarter-on-quarter growth in the manufacturing sector than previously thought, with a downward revision to 0.7% from 0.9%.
Annual growth on the VocaLink Services Index falls from 0.9% over the three months to November to 0.6% over the three months to December. Pay growth in the sector remains higher than in the manufacturing and public sectors. Continuing an eight month pattern of stability, the VocaLink Public Sector Index sits at 0.5% annual growth in the three months to December.
Commenting on this month’s findings, David Yates, Chief Executive Officer at VocaLink, said: “Today’s findings from the VocaLink Take Home Pay Index clearly show the struggles which have been felt by many UK families for a significant period of time, as pay packets fail to keep up with consumer price rises. Inflation at present is a particular concern as we are seeing an increase in prices of essentials. The largest upward pressures to annual inflation in November came from food and non-alcoholic beverages, along with household services. These day to day items form the basis of household expenditure up and down the country. This month’s VocaLink Take Home Pay Index highlights the constrained pay growth and consequent squeeze on household finances that will strike a chord with many employees”
Douglas McWilliams, Chief Executive of economics consultancy Cebr, said:
“The consumer price index in November 2012 stood at 2.7%, well above the Bank of England’s central target of 2.0%. Today’s findings clearly illustrate the downward pressure that these elevated inflation rates are placing on peoples’ wallets. With energy prices scheduled to increase in December and January, inflation is now looking set to ramp up and remain elevated throughout much of 2013. As such, it could be some time before incomes regain spending strength.”
Join us on