Falls in bonus pay nudge earnings growth down to 2.4%
The rate of growth of average weekly earnings in the whole economy dropped back again in the latest figures from the ONS, to 2.4% in the year to June 2018, down from 2.5% in the year to May and 2.6% in the year to April. Bonus pay fell across all industrial sectors, especially in finance and business services, and was a major contribution to the drop in total pay growth.
Underlying earnings growth, as measured by the ‘regular pay’ series, which excludes bonuses, was a little higher at 2.7%. While this was also down on the previous month’s headline figure – which is based on a rolling three-month average – the single-month figures for regular pay for June showed a slight rise, from 2.7% to 2.8%, in contrast to the single-month figures for total pay, which fell sharply from 2.5% to 2.1%.
Average weekly earnings by sector at June 2018
|Average weekly earnings - regular pay (£pw)||Average weekly bonuses (£pw)
|Finance and business services||582||75|
|Wholesale, retail, hotels and restaurants||333||21|
In last month’s figures, the fall in bonuses was confined to the finance and business services sector. However, this month bonuses fell back across all sectors, reflecting weakness in the economy in the year to June.
In the finance and business services sector, total average earnings grew by 1.5% in the year to June, marginally up on the figure of 1.4% in the year to May. In this sector the rise in earnings growth excluding bonuses was 2.4%.
In manufacturing, average earnings grew by 2.5% in the year to June, down from 2.9% in the year to May. However, a year ago, in June 2017, the rate of growth in manufacturing was much lower, at 1.3%.
In construction, where pay growth has been higher than other sectors recently, the rate of growth in average earnings was 5.3%, down a little from a revised figure of 5.7% in the year to May. However, in June 2017, the rate of growth in earnings in construction was almost zero, at 0.1%.
In the lowest-paying sector of wholesale, retail, hotels and restaurants, which has seen significant job losses over recent months, earnings growth was 3.2% in the year to June, the same as the revised figure for May. In June 2017, the rate of growth was a percentage point lower at 2.2%.
Looking at the private sector overall, average earnings growth was 2.4% in the year to June on the total pay measure and 2.8% on the regular pay measure. Meanwhile in the public sector, pay growth was 2.2% in the year to June, the same as the revised figure for May (both on the total pay measure, since bonuses are not a significant component of public sector pay).
Despite the public sector employing a much greater proportion of graduates and professional staff than the private sector, average weekly earnings are currently lower in the former than in the latter. Actual average earnings in the public sector dropped back from £518 in May to £517 in June, slightly behind the private sector figure of £518. First-stage increases from the recent three-year pay deal in the NHS were only paid in July and as such have yet to appear in the ONS data.
Visiting Fellow, University of Greenwich