Britons saw their pay packets continue to lag heavily behind inflation, despite a slight rise in earnings.
The Office for National Statistics (ONS) revealed that regular wages excluding bonuses plunged by 3.7% over the three months to May against the rate of consumer price index (CPI) inflation; representing the biggest slump in more than 20 years.
Regular pay, excluding bonuses, rose slightly to 4.3% for the period, without taking inflation into account.
It comes after CPI inflation hit a 40-year record of 9.1% in May and is expected to reach as high as 11% later this year.
Energy and fuel bills have soared amid the impact of the Ukraine war, but many have seen wages struggle to keep up.
The ONS added that total pay including bonuses lifted by 6.2% for the three-month period, as workers in the financial sector drove a rise in bonuses.
Pressure on wages came as official figures showed that the number of UK workers on payrolls rose by 31,000 between May and June to 29.6 million.
Meanwhile, the rate of unemployment decreased to 3.8% for the three-month period.
Unemployment fell as job vacancies also continued to increase, with major staff shortages in industries such as hospitality.
There were 1.29 million job vacancies over the three months to June, representing a 6,900 rise on the previous quarter.
ONS head of labour market and household statistics David Freeman said: “Today’s figures continue to suggest a mixed picture for the labour market.
“The number of people in employment remains below pre-pandemic levels and, while the number of people neither working nor looking for a job is now falling, it remains well up on where it was before Covid-19 struck.
“With demand for labour clearly still very high, unemployment fell again, employment rose and there was another record low for redundancies.
“Following recent increases in inflation, pay is now clearly falling in real terms, both including and excluding bonuses.”
Benefit claims decreased in June 2022 with figures showing 110,600 claims for universal credit and jobseekers allowance – a decrease of 4,400 on the previous month.
The Scottish Government said the figures show the economy is “resilient” as the number of people going into employment continued to increase.
The percentage of people in employment has risen slightly with statistics showing 75.4% of over-16s in Scotland were in employment from March to May 2022, compared to 74.8% in the previous quarter from December 2021 to February 2022; an increase of 0.6%.
However, there has been a slight increase in the number of people in Scotland who are unemployed, with figures showing the number of people in Scotland over the age of 16 who are out of work rising from 3.4% in the previous quarter from December 2021 to February 2022 to 3.5% over March to May 2022.
Scotland also saw a slight increase in the number of people who are economically inactive – those who are not available for paid employment. Figures show 21.8% of adults over 16 are economically inactive in July 2022, compared to 21.6% in February 2022.
Median monthly wages are also on the rise showing a 5.6% increase to £2,126 in June 2022 compared to just under £2,000 per month on the same period last year.
Tom Arthur, Scottish Government public finance minister, said: “The Scottish economy still shows signs of resilience with the employment rate increasing by 0.6 percentage points over the quarter.
“While today’s figures continue to show recovery in Scotland’s labour market, Scotland continues to face economic challenges with the rising cost of living, the continued impact of Brexit and recovery from the effects of the pandemic and the economic consequences of Russia’s illegal invasion of Ukraine.”
Scottish Secretary Alister Jack said: “Today’s figures show Scotland’s labour market remains strong, with an increasing number of people on the payroll and unemployment at low levels.”
Chancellor Nadhim Zahawi responded: “I am acutely aware that rising prices are affecting how far people’s hard-earned income goes, so we are providing help for households through cash grants and tax cuts.
“We’re working alongside the Bank of England to bear down on inflation, providing support worth £37bn this financial year for the cost of living, and investing in skills to help people get into work and progress.”
Labour’s Pat McFadden, shadow chief secretary to the Treasury, said: “Today’s record fall in real wages comes after a decade where wages have stagnated for workers across the economy.
“This is because the Conservatives have failed to grow the economy, which has left people more exposed to inflation and the cost-of-living crisis.
“Labour’s number one mission in government would be to grow our economy, making the country more prosperous and making its people better off.”
Meanwhile, shoppers are set to see their grocery bills for the year leap by £454, after food and drink inflation hit the second-highest level on record.
Retail research firm Kantar revealed that grocery price inflation leapt to 9.9% over the four weeks to 10 July, rising sharply from 8.3% in the previous month.
Researchers said they saw the fastest increases in prices for products such as dog food, butter and milk.
Supply chain issues and labour pressures have added to costs in food production, which are now being fed back to shoppers.
Fraser McKevitt, head of retail and consumer insight at Kantar, said he expects the overall record for grocery inflation to be surpassed “come August”.
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