National Minimum Wage

National Minimum Wage
12
Figure 1.5: Growth in Average Weekly Earnings Total Pay, GB, and Price Inflation, UK,
2007-2011
Change on a year earlier (per cent)
8
6
4
2
0
-2
-4
-6
2007 January
2007 May
2007 September
2008 January
2008 May
2008 September
2009 January
2009 May
AWE whole economy
Month
AWE private sector AWE public sector
excluding financial
services
RPI
Source: ONS, AWE total pay, annual three-month average change for: the whole economy (KAC3), the private sector (KAC6), and the
public sector excluding financial services (KAE2), monthly, seasonally adjusted, GB, 2007-2011; and annual change in RPI (CZBH),
monthly, not seasonally adjusted, UK, 2007-2011.
1.28 In the event, slower than expected economic growth in 2011 led to some labour market
weakening, and the resulting spare capacity acted as a dampener on earnings growth.
Consequently, although an upturn in earnings growth occurred in the summer, when the rate
of increase reached 2.8 per cent, it was not maintained. Total pay growth in the three months
to September 2011 of 2.3 per cent was towards the lower end of the forecast range at the
time of our last report. The National Accounts measures of earnings show similar growth.
In the year to the third quarter of 2011, the compensation of employees increased by 2.4 per
cent while the increase in wages and salaries was 2.3 per cent. In sharp contrast, earnings
growth recorded by ASHE between April 2010 and April 2011 was much lower.
1.29 According to ASHE, annual growth in median hourly earnings was just 0.4 per cent in April
2011 while mean hourly earnings growth was slightly higher at 0.9 per cent. This was below
the growth in total earnings according to AWE for the same period, which was 2.0 per cent.
There are a number of factors that may help to explain this discrepancy, for example,
structural differences in the surveys such as their coverage of small employers, temporary
employees, and the finance sector. These differences had not been evident in previous years.
Indeed, over the longer term the two measures show similar levels of cumulative earnings
increase: since 2000, the cumulative increase in AWE total pay and ASHE median pay are
practically the same. However, the differences in 2011 are important as we use ASHE to look
2009 September
2010 January
2010 May
2010 September
2011 January
2011 May
2011 September
8
6
4
2
0
-2
-4
-6