Average weekly earnings in Great Britain: December 2021

Estimates of growth in earnings for employees before tax and other deductions from pay.

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Cyswllt:
Email Nicola White

Dyddiad y datganiad:
14 December 2021

Cyhoeddiad nesaf:
18 January 2022

1. Other pages in this release

Other commentary from the latest labour market data can be found on the following pages:

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2. Main points for August to October 2021

  • Growth in average total pay (including bonuses) was 4.9% and growth in regular pay (excluding bonuses) was 4.3% among employees in August to October 2021.

  • Previous months' strong growth rates were affected upwards by base and compositional effects; these temporary factors have largely worked their way out of the latest growth rates, but a small amount of base effect for certain sectors may still be present.

  • In July we published a blog: How COVID-19 has impacted the Average Weekly Earnings data, which explains the complexities of interpreting earnings data.

  • In real terms (adjusted for inflation), total and regular pay continues to grow at a faster rate than inflation, at 1.7% for total pay and 1.0% for regular pay.

  • Average total pay growth for the private sector was 5.4% in August to October 2021, while for the public sector, it was 2.7%; all sectors saw growth, with the finance and business services sector seeing the largest growth rate at 7.7%.

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The estimates in this bulletin come from a survey of businesses. It is not possible to survey every business each month, so these statistics are estimates based on a sample, not precise figures. Estimates are based on all employees on company payrolls, including those who have been furloughed under the Coronavirus Job Retention Scheme (CJRS).

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3. Analysis of average weekly earnings (AWE)

Average weekly earnings were estimated at £586 for total pay, and £548 for regular pay in October 2021. Figure 1 shows that average weekly earnings have steadily increased, with the exception of the early months of the coronavirus (COVID-19) pandemic.

The rate of annual pay growth for total pay was 4.9%, and the annual pay growth for regular pay was 4.3% in August to October 2021. Previous months' strong growth rates were affected upwards by base and compositional effects. These temporary factors have largely worked their way out of the latest growth rates, but a small amount of base effect for certain sectors may still be present.

In real terms (adjusted for inflation), total pay and regular pay both continue to grow at a faster rate than inflation, at 1.7% and 1.0%, respectively.

More about economy, business and jobs

Sector and industry

Average total pay growth for the private sector was 5.4% in August to October 2021, while for the public sector it was 2.7%. Since the end of 2019, the public sector generally had stronger growth than the private sector; but since April 2021, the year-on-year comparison with a low base period has meant the private sector now shows stronger growth.

Prior to the coronavirus pandemic, each sector had shown similar positive growth. During summer 2020, most sectors' earnings were affected by the coronavirus pandemic; negative pay growth rates were seen when compared with 2019, except for the public sector, which maintained positive growth rates. These annual growth rates returned to pre-coronavirus pandemic levels in early 2021. From April to August 2021, growth rates were inflated, given the comparison with the low base period.

Construction had the largest negative growth rate in June 2020 (negative 10.2%) and the largest growth rates in June 2021 (14.4%). Outside of the public sector, the finance and business services sector had the smallest drop in growth rates in June 2020 (negative 1.0%). However, it was one of the strongest growth sectors in June 2021 (12.2%), and for the latest time period, saw a growth rate of 7.7%.

Interpreting average earnings - base and compositional effects

Interpreting average earnings data over the last year has been difficult. In July, we published a blog: How COVID-19 has impacted the Average Weekly Earnings data, which explains the complexities of interpreting these data.

There were temporary factors that we refer to as base and compositional effects, which increased the headline growth rate in earnings above the underlying rate. These temporary factors have largely worked their way out of the latest growth rates, but a small amount of base effect for certain sectors may still be present.

The base effect refers to the comparison with the low base periods between April and August 2020, when earnings were mostly affected by the coronavirus pandemic and negative pay growth rates were seen. However, over the last two months, the base effect has been reducing. As with September, the base effect in October is minimal for most sectors. Some base effect is still seen in the construction sector, mainly in August and September. Some base effect can also be seen to a smaller degree in manufacturing and wholesaling, retailing, hotels and restaurants for August. Therefore, a small amount of inflation will be present for the August to October 2021 growth rates, but not to the degree we have previously seen.

The composition effect is where pay growth has been affected by a changing composition of employee jobs, which has increased average pay and needs to be considered when interpreting average pay growth. This is explained further in the Measuring the data section.

As reported over the past few months, the compositional effect has been reducing. We are now comparing the composition of the workforce with months well-after the initial shock of the coronavirus pandemic, which was when the composition of the workforce was most effected. The latest data show that there is no additional compositional effect given the two time periods we are comparing. We will continue to monitor this effect and develop our methods over the next few months.

Given the recent reduction in the base effect and the changes in the compositional effect, we have not provided an underlying range for the August to October 2021 growth rate, given the underlying range was always a temporary measure based on experimental methods. However, there may still be a small amount of base effect present for certain sectors.

As discussed in previous releases, the pattern of pay growth was also affected by the proportion of employees who were furloughed, and the extent to which employers have topped up payments received for those employees under the Coronavirus Job Retention Scheme (CJRS). The scheme ended at the end of September 2021, with 1.1 million people reported to be on the scheme at that time. The latest HM Revenue and Customs (HMRC) published CJRS statistics (4 November 2021) are available.

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4. Average weekly earnings data

Average weekly earnings
Dataset EARN01 | Released 14 December 2021
Headline estimates of earnings growth in Great Britain (seasonally adjusted).

Average weekly earnings by sector
Dataset EARN02 | Released 14 December 2021
Estimates of earnings in Great Britain broken down to show the effects of changes in wages and the effects of changes in the composition of employment (not seasonally adjusted).

Average weekly earnings by industry
Dataset EARN03 | Released 14 December 2021
Estimates of earnings in Great Britain broken down by detailed industrial sector (not seasonally adjusted).

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5. Glossary

Average Weekly Earnings (AWE)

Average Weekly Earnings (AWE) is the lead monthly measure of average weekly earnings per employee. It is calculated using information based on the Monthly Wages and Salaries Survey (MWSS), which samples around 9,000 employers in Great Britain.

The estimates are not just a measure of pay rises. They do not, for example, adjust for changes in the proportion of the workforce who work full-time or part-time, or other compositional changes within the workforce. The estimates do not include earnings of self-employed people.

Estimates are available for both total pay (which includes bonus payments) and regular pay (which excludes bonus payments). Estimates are available in both nominal terms (not adjusted for inflation) and real terms (adjusted for inflation).

Estimates of pay growth are also published using HM Revenue and Customs' (HMRC) data in Earnings and employment from Pay As You Earn Real Time Information, UK.

The HMRC estimates are presented in median pay-terms, but they also include mean pay, as does AWE. There are some differences between the sources, most notably that the HMRC estimates include any redundancy payments that are made through payroll. Further detail is provided in a Comparison of labour market sources, published 11 December 2020.

Bonus

A bonus is a form of reward or recognition granted by an employer. When an employee receives a bonus payment, there is no expectation or assumption that the bonus will be used to cover any specific expense. The value and timing of a bonus payment can be at the discretion of the employer or stipulated in workplace agreements.

Consumer Prices Index including owner occupiers' housing costs

As of 21 March 2017, the Consumer Prices Index including owner occupiers' housing costs (CPIH) became our lead measure of inflation. It is our most comprehensive measure of UK consumer price inflation.

Monthly Wages and Salaries Survey

The Monthly Wages and Salaries Survey (MWSS) is a survey through which we collect information on wages and salaries. It is distributed monthly to around 9,000 employers, covering around 12.8 million employees.

A more detailed glossary is available.

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6. Measuring the data

The survey response rate was 79%; this was slightly lower than the 83% target in the months prior to the coronavirus (COVID-19) pandemic.

Compositional effect

The change in pay growth has been affected by a changing composition of employee jobs, where we have seen a fall in the number and proportion of lower-paid employee jobs. This changing composition naturally increases average pay and needs to be kept in mind when interpreting average pay growth. Changes in the profile of employee jobs in the economy will affect average pay growth; a decrease in employee numbers in jobs that have lower pay can have an upward effect on average pay, and the other way around.

As such, we can consider the compositional effects from three angles:

These three compositional analyses are not mutually exclusive, and do not necessarily consider all the compositional effects that have an impact on average pay. However, they do indicate that a proportion of estimated pay growth is because of recent changes in employee job profiles. We plan to conduct more detailed analysis on the impact of compositional factors.

More information on the compositional effect on the data is available in the April 2021 edition of this release.

Sampling variability for average weekly earnings single month growth rates in percentage points is also available in the April 2021 edition of this release.

For more information on how labour market data sources are affected by the coronavirus pandemic, see the article Coronavirus and the effects on UK labour market statistics, published 6 May 2020. This article details some of the challenges that we have faced in producing estimates at this time.

Our article Comparison of labour market data sources (published 11 December 2020), discusses some of the main differences between our data sources.

More information on measuring the data is available in the April 2021 edition of this release.

Consultation on the Code of Practice for Statistics - proposed change to 9:30am release practice

On behalf of the UK Statistics Authority, the Office for Statistics Regulation (OSR) is conducting a consultation on the Code of Practice for Statistics, proposing changes to the 9:30am release practice. Please send comments by 21 December 2021 to regulation@statistics.gov.uk.

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7. Strengths and limitations

Information on the strengths and limitations of this bulletin is available in the April 2021 edition of this release, in A guide to labour market statistics, and in A guide to sources of data on earnings and income.

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Manylion cyswllt ar gyfer y Bwletin ystadegol

Nicola White
labour.market@ons.gov.uk
Ffôn: +44 1633 456120