Wages and inflation

High earners having wage growth above inflation is unsurprising. It's the low-income individuals that need closer scrutiny, with wages often stagnating and only increasing yearly as the National Minimum Wage increases. The problem in this area, as I see it, is that most day-to-day employees are predominantly being managed on a cost and budget model basis. This means that they are always restricted on how their income can grow. By contrast, more senior employees, such as C-Suite executives and above, are operating on an outcome-based ROI model, so they have much more opportunity to request and achieve a larger percentage of the wealth that they create for the business. As long as this dysfunctionality exists within the management and operating structures of UK businesses, we will never see the level of growth required in the lower income bracket, to pull hard working people out of poverty and the gap between the haves and have-nots will continue to grow.

Real wages in the UK remain catastrophically negative. There is a reason for this, namely labour structures have not given workers strong pay bargaining power. This means that employees across the developed world are failing to achieve the very minimum aim of at least maintaining their standard of living.

This isn't the news anyone wants to hear before Christmas, as inflation bites for both employees and a range of businesses. There are structural inequalities in the UK and the current situation is amplifying this, causing significant distress and impacting on the financial wellbeing of the least privileged in society, but also those who've not been squeezed like this before. And given the inflation figures rarely track reality, I doubt anyone apart from a chosen few are actually seeing wage growth. If you consider the strikes we're seeing across multiple industries, we are looking at a winter of discontent.

As we head into the next year in anticipation of Sunak's tax hikes to fight off inflation, we expect more households to tighten their purse strings even more. Inflation continues to eat up a huge portion of consumers’ disposable incomes, which weighs down on consumer demand. In the property market, for instance, prices are already slipping. However, the gap between renters’ wages and housing affordability remains wide, dashing hopes of ownership.

This latest report on wages highlights the pain working people in the UK are feeling. Employers may not be able to pay people more but they can show they care and address the rapid decline in levels of financial wellbeing. Financial education, perks and benefits that match people's greatest needs and money and mental health training can all create an empathetic space to have a conversation about managing money in difficult times.

As real wages have plummeted, worry about inflation amongst workers has soared. Glassdoor data reveals a threefold increase in mentions of 'inflation' in 2022 reviews from UK employees from last year. Unusually high inflation and sluggish productivity since the pandemic are key reasons wages haven’t been able to keep up. Between these issues and the continued difficulty of hiring, now might be a good time for companies to invest in productivity-enhancing tools. But both problems are difficult for any single company to tackle. Until either can be tamed, companies need to listen to what their workers really want to feel supported. Even if an employer cannot raise salaries, there are other ways to support workers, such as increased flexibility, one-off bonuses, winter energy stipends, and more. Each can effectively boost staff morale while limiting long-term financial liabilities for the employer as they are easier to claw back.