Pay in 2017: five things we’ve learned

Statistics published yesterday by the ONS offer the most detailed picture available of earnings in 2017. Here are five things we learned – and a couple of things we didn’t:

1. Average earnings fell between 2016 and 2017 after adjusting for inflation…

Average weekly pay of full-time employees increased by 2.2% compared to 2016. But prices grew by 2.7% in the year-to-April, so after taking inflation into account that translates into a 0.5% fall.

Thus the UK’s long period of poor pay performance continues. After inflation, average weekly pay for full-time workers is around £34 lower than in 2008:

2. …but there was stronger growth for lower-paid employees …

Although earnings fell for workers on middle levels of pay, the National Living Wage helped boost earnings among lower-paid employees. The National Living Wage, which applies to employees aged 25 and over, increased from £7.20 to £7.50 in April.

The main beneficiaries were part-time workers. For someone on the cusp of the bottom 10% of part-time workers (the 10th percentile), hourly pay increased by 5.8% to £7.50 – after inflation, that’s a 3.1% increase.

The effect was visible for full-time workers too. Hourly pay at the 10th percentile increased by 3.7% to £8.21 (a 1.0% rise after inflation).

3. … which increased average earnings in some lower-skilled occupations 

Average hourly pay increased the most in sales and customer service occupations and low-skilled elementary occupations (which include roles such as cleaners, waiters, bar staff etc). Both these occupation groups include a large proportion of low-paid workers, who are likely to have benefited from the increase in the National Living Wage.

4. Pay grew above inflation in the private sector

Average weekly pay was up 2.8% for full-time employees in the private sector, slightly higher than inflation. Pay growth was substantially weaker in the public sector at 0.9%.

However, pay increased more strongly for men working full-time in the public sector (up 2.6%) than women (up 0.4%), causing the gender pay gap in the public sector to increase from 11% to 13%.

The opposite was true in the private sector: women working full-time saw average weekly pay increase by 3.7% compared to 2.7% for men, meaning the gender pay gap narrowed from 17% to 16%.

5. Good news in London, not so good in Yorkshire & Humber 

London leads the other UK regions in terms of earnings: average weekly pay for full-time employees living in London was £655 in April 2017, compared to the UK average of £550.

Full-time workers living in London also saw the highest growth in earnings compared to the previous year, at 3.6%. At the other end of the range, average pay increased by a more paltry 0.8% in Yorkshire and the Humber.

Nevertheless, looking over the longer-term and adjusting for inflation, pay for people living in London is still around 8% below its level prior to the economic downturn in 2008, the largest difference for any region. Across regions real average pay remains lower than it was nine years ago.

6. And some things we didn’t learn

Although the ONS statistics provide a great deal of detail on earnings in the UK, they don’t tell us about the pay rises received by individual employees. While the two are often confused, that’s not the same as the change in the median reported here.

Firstly, the median might shift because of people entering or leaving the workforce and the type of work being done, rather than because anyone has received a pay rise (or pay cut). Secondly, pay rises for people at the top and bottom of the pay ladder could be very different than for those at the middle. In fact, as shown in previous ONS analysis, there is wide variation in the pay increases or decreases received by individuals from year to year.

Also missing from yesterday’s data is information on pay of self-employed workers – the ONS statistics cover employees only. Earnings from self-employment is harder to measure than for employees, but with just under five million self-employed people in the UK it leaves a substantial hole in our picture of earnings.

Some more technical notes about the figures used in this article:

  • All the ‘averages’ reported here refer to median earnings – the point at which half of people earn more and half earn less.
  • Figures are adjusted for inflation based on the Consumer Prices Index (CPI) measure of inflation, so may differ slightly to those presented by the ONS which tends to use the CPIH measure.
  • Changes in public and private sector pay for men and women refer to weekly earnings, although the gender pay gap figures are based on hourly pay excluding overtime. This does not greatly matter in this case because there were similar changes in hourly and weekly pay over the last year.
  • There are discontinuities in the statistics in 2004, 2006 and 2011. Reported changes and trends over time are calculated taking these discontinuities into account.

Picture credit: £10 and £20 notes in wallet by Bank of England.  Licensed under CC BY-NC-ND 2.0 / image cropped.