Other commentary from the latest labour market data can be found on the following pages:
Annual growth in average employee pay has been affected by temporary factors that have inflated the headline growth rate, these factors are now reducing and having a smaller impact on growth rates; base effects refer to the latest months being compared with low base periods when earnings were first affected by the coronavirus (COVID-19) pandemic; and compositional effects where there has been a fall in the number and proportion of lower-paid employee jobs, therefore increasing average earnings.
Growth in average total pay (including bonuses) was 5.8% and growth in regular pay (excluding bonuses) was 4.9% among employees in July to September 2021, however, as this growth is affected by temporary factors, it should be interpreted with caution.
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 the current climate.
All sectors saw growth, including all the industry groups within each sector; average total pay growth for the private sector was 6.6% in July to September 2021, while for the public sector, it was 2.4%.
Average weekly earnings were estimated at £584 for total pay, and £544 for regular pay in September 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 5.8% and regular pay was 4.9% in July to September 2021. Previous months' strong growth rates have been affected by base and compositional effects; you can find out more in our blog: Beware Base Effects. As such, average pay growth rates have been affected upwards by the base effects, where the latest months are now compared with low base periods when earnings were first affected by the coronavirus (COVID-19) pandemic. This is in addition to being affected by a fall in the number and proportion of lower-paid jobs, compared with before the pandemic (composition effect). These effects are now reducing and having a smaller impact on the latest growth rates.
In real terms (adjusted for inflation), total and regular pay are now growing at a faster rate than inflation, at 3.1% for total pay and 2.2% for regular pay. Average real pay growth rates are also affected by these temporary factors in the same way as nominal pay and should be interpreted with caution.
More about economy, business and jobs
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. The blog highlights different approaches that can be taken to estimate an underlying rate, while explaining there is no simple answer. In particular, there are temporary factors that we refer to as base and compositional effects, which have increased the headline growth rate in earnings above the underlying rate.
The base effect refers to the comparison with the low base periods between April and August 2020, when earnings were affected by the coronavirus pandemic and negative pay growth rates were seen. However, over the last two months the base effect has been reducing. For September 2021, the base effect is minimal for most sectors except for construction, wholesaling, retailing, hotels and restaurants, where we are still seeing some base effect present in the data, inflating the growth rates slightly.
The blog explains that there are a number of ways you can try to strip out these base effects, but there is no single method everyone would agree on. We have tried a couple of simple approaches, however neither approach is perfect. The first requires an estimate of what would have happened without the pandemic, and the second assumes that wage growth was constant over the last two years, which we use to generate a range for the base effect.
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 in September 2021 with September 2020, which was several months after the initial shock of the coronavirus pandemic on the composition of the workforce. The latest data shows that there is no additional compositional effect given the two time periods we are comparing. We will continue to monitor this effect over the next few months.
Latest figures show that for July to September 2021, the regular earnings growth rate was 4.9%. This growth rate is likely to be slightly inflated given some base effect is still present. As such, using the same two methods we previously have, we estimate that the regular earnings growth rate could be as low as 3.4%. Given the uncertainty of the methods, the figures should be interpreted with caution.
In addition, and discussed in previous releases, the pattern of pay growth is also affected by the proportion of employees who are furloughed, and the extent to which employers have topped up payments received for those employees under the Coronavirus Job Retention Scheme (CJRS). HM Revenue and Customs (HMRC) published CJRS statistics on 4 November 2021, indicating that 2.8 million people were on furlough at the end of September 2020, compared with 1.1 million people at the end of September 2021.The lower proportion of workers on furlough has contributed towards the strong growth when comparing pay in September 2021 with September 2020.
Sector and industry
Average total pay growth for the private sector was 6.6% in July to September 2021, while for the public sector it was 2.4%. 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. All sectors saw positive growth, including all the industry groups within each sector.Nôl i'r tabl cynnwys
Average weekly earnings
Dataset EARN01 | Released 16 November 2021
Headline estimates of earnings growth in Great Britain (seasonally adjusted).
Average weekly earnings by sector
Dataset EARN02 | Released 16 November 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 16 November 2021
Estimates of earnings in Great Britain broken down by detailed industrial sector (not seasonally adjusted).
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 bonuses). 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's) 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.
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.Nôl i'r tabl cynnwys
The survey response rate was 77%, slightly lower than the 83% target in the months prior to the coronavirus (COVID-19) pandemic.
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 borne 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:
Labour Force Survey data highlight a decrease in the number of part-time jobs (which have lower pay) and jobs in lower-paying sectors
changing distribution of jobs between industries, provided in Dataset EARN02: Average weekly earnings by sector, affecting average pay growth by 0.3%
HM Revenue and Customs (HMRC) Earnings and employment from Pay As You Earn Real Time Information, UK: November 2020 inflows and outflows data indicate a fall in new entrants to the labour market, who are lower paid than average
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 (COVID-19) 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 firstname.lastname@example.org.Nôl i'r tabl cynnwys
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