Annual Growth in Private Sector Pay Reaches 8.1% in July 2023
In a recent analysis, we examined the relationship between wage increases and price increases in selected industry sectors in the UK from 2019 to June 2023. Here are the key findings:
1. Wage Growth: The annual growth rate of regular private sector pay reached 8.1% in May to July 2023, reflecting significant wage increases.
2. Manufacturing and Services: In manufacturing and some services industries, wage increases between 2019 and June 2023 did not significantly impact labor costs as a fraction of output. Other factors appeared to drive industry output price growth.
3. Services Industries: Several services industries showed that wage increases were important, and the pass-through of these wage rises explained most of the output price growth since 2019.
4. Business-Level Correlation: In a sample of large manufacturing businesses, there was generally no clear positive correlation between the amount of a business’s annual wage increases and the size of output price increases. While there was limited evidence of a positive correlation in Q1 2023, this correlation had fallen back in Q2 2023.
5. Business Insights and Conditions: Businesses reporting wage increases were 59% more likely to report an increase in output prices over the same period. Businesses facing difficulties filling vacancies were more likely to raise prices, as were those experiencing increased demand.
This analysis provides insights into how wage increases have impacted various industries in the UK, with some sectors being more affected by these increases than others. It also highlights the complex relationship between wage and price increases in the current economic climate, with various factors contributing to changes in prices.
For a more detailed analysis, including data sources and quality, please refer to the full report released in September 2023.