Average weekly earnings in Great Britain: February 2022

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:
15 February 2022

Cyhoeddiad nesaf:
15 March 2022

1. Table of contents

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

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2. Main points for October to December 2021

  • Growth in average total pay (including bonuses) was 4.3% and growth in regular pay (excluding bonuses) was 3.7% among employees in October to December 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), in October to December 2021, total and regular pay fell on the year at negative 0.1% for total pay and negative 0.8% for regular pay.

  • Single-month growth in real average total weekly earnings for December 2021 increased 0.1% on the year because of an increase in bonus payments compared with December 2020; whereas the single-month growth in real average regular weekly earnings fell on the year in both November 2021 and December 2021, at negative 1.0% and negative 1.2% respectively.

  • Average total pay growth for the private sector was 4.6% in October to December 2021, while for the public sector, it was 2.6%; all industry sectors saw growth, with the finance and business services sector seeing the largest growth rate at 8.1% following an increase in bonus payments compared with December 2020.

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

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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 £596 for total pay, and £552 for regular pay in December 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 4.3%, and the annual pay growth for regular pay was 3.7% in October to December 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), in October to December 2021, total and regular pay fell on the year at negative 0.1% for total pay and negative 0.8% for regular pay. This fall on the year was the first time since June to August 2020 for total pay and May to July 2020 for regular pay. The increasing difference between nominal and real growth rates in recent months is because of increasing consumer price inflation (including owner occupiers' housing costs), which for the three months of October to December 2021 was an average of 4.4%.

Single-month growth in real average total weekly earnings increased 0.1% in December 2021 because of an increase in bonus payments compared with December 2020. The single-month growth in real average regular weekly earnings fell on the year in both November 2021 and December 2021, at negative 1.0% and negative 1.2% respectively. Figure 3 shows a comparison of monthly real total and regular pay growth rates and monthly inflation.

Sector and industry

Average total pay growth for the private sector was 4.6% in October to December 2021, while for the public sector it was 2.6%. In October to December 2021, the finance and business services sector had the largest growth rate (8.1%), partly because of an increase in bonus payments in December 2021 compared with December 2020. Industries within this sector showed some of the largest growth rates among all industries, these being finance and insurance activities, real estate activities, and administrative and support service activities. Outside this sector, there were also strong growth rates in wholesale trade, except of motor vehicles and motorcycles, and information and communication.

Interpreting average earnings – base and compositional effects

Interpreting average earnings data over the last year has been difficult. In July 2021, 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 very low base periods between April and August 2020, when earnings were mostly affected by the coronavirus pandemic and pay growth rates were negative. This has now largely worked its way out.

As discussed in previous releases, pay growth was 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). As such, average weekly earnings for October to December 2020 included around 3.4 million people on furlough compared with none in October to December 2021 as the scheme finished at the end of September 2021, which is the first time this has occurred in the quarterly data. Therefore, those sectors most affected by furlough in October to December 2020 (accommodation and food service activities, and wholesale and retail) may still include a small amount of base effect.

The composition effect is where pay growth has been affected by a changing composition of employee jobs, which during the coronavirus pandemic had increased average pay, and needs to be considered when interpreting average pay growth, as explained in the Measuring the data section: The latest data show that the composition effect is now at more normal levels and we are no longer observing the excessive levels we saw during periods of the pandemic in 2020 and 2021. Following the changes we have seen when looking at compositional effects over the past two years, we plan to develop our methods and conduct more detailed analysis to study the impact of compositional effects in the future.

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4. Average weekly earnings data

Average weekly earnings
Dataset EARN01 | Released 15 February 2022
Headline estimates of earnings growth in Great Britain (seasonally adjusted).

Average weekly earnings by sector
Dataset EARN02 | Released 15 February 2022
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 15 February 2022
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 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 78%; this was slightly lower than the 83% target in the months prior to the coronavirus (COVID-19) pandemic.

Real earnings

The real Average Weekly Earnings (AWE) is calculated as the non-seasonally adjusted AWE (shown in Table EARN02) divided by the Consumer Prices Index including owner occupiers' housing costs (CPIH), our preferred measure of consumer price inflation (series identifier L522). The ratio is then referenced as an index with 2015 equals 100, and seasonally adjusted.

Compositional effect

Following the initial impact of the coronavirus pandemic, the change in pay growth was heavily affected by a changing composition of employee jobs, where we saw a fall in the number and proportion of lower-paid employee jobs. This changing composition naturally increased average pay and should 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, when looking at the compositional effect following the initial impact of the coronavirus pandemic, so from the end of 2020 to mid-2021, 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. Following the changes, we have seen when looking at compositional effects over the past two years, we plan to develop our methods and conduct more detailed analysis to study the impact of compositional factors in the future.

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.

Making our published spreadsheets accessible

Following the Government Statistical Service (GSS) guidance on releasing statistics in spreadsheets we will be amending our published tables over the coming months to improve usability, accessibility and machine readability of our published statistics. To help users change to the new formats we will be publishing sample versions of a selection of our tables, and where practical, initially publish the tables in both the new and current formats. If you have any questions or comments, please email labour.market@ons.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, in A guide to sources of data on earnings and the Income and earnings interactive dashboard.

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Manylion cyswllt ar gyfer y Bwletin ystadegol

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