Alastair Hatchett | 15 Jun 2022

Average weekly earnings show wide gap between private sector and public sector earnings

The growth rate of average weekly earnings in the whole of the economy in the year to April 2022 was 6.8% on the total pay measure and 4.2% on the regular pay measure. The difference between the two measures is the consequence of strong growth in bonus pay in the period, especially in the finance and business services sector.

But behind these figures, there was a sharp difference between average earnings growth in the private sector and the public sector. The annual rate of growth in total pay in the private sector was 8.0% compared with an annual rate of growth of 1.6% in the public sector (excluding financial services). The ONS commented that the difference is ‘among the largest we have seen’.

It is important to note that a number of significant April pay awards in the public sector are now overdue, most notably that for the NHS. Here the Government has indicated a limit of 3% to be applied to all salaries by the NHS Pay Review Body.

Average earnings growth in all major components of the private sector were strong. The highest rate of growth in total pay was in finance and business services, at 10.6%. This was almost unchanged from the rate of 10.5% in the year to March.

Elsewhere in the private sector, there has been a modest increase in earnings in manufacturing and average earnings in manufacturing grew at an annual rate of 4.3% in the year to April, compared with rather low figures of around 2.5% in 2021.

The rate of growth in average earnings in construction has recovered in recent months. The rate of growth in April was 7.6%, up from 6.9% in the year March and up substantially from 2.9% in the year to January.

In wholesaling, retailing, hotels and restaurants, the largest and lowest paying sector of the economy, average earnings grew by 8.4% in the year to April. Pay awards in this sector have been pushed upwards by labour market pressures and by the increase in the National Living Wage, which rose by 6.6% in April 2022.

Average weekly earnings growth still trending upwards

May 2022

Total average weekly earnings grew by 7.0% across the whole economy in the year to the end of the three-month period including March 2022, according to the latest figures from the Office for National Statistics (ONS). This is up sharply on the previous headline figure, for the year to the three months ending February, which was 5.6%. The main contribution to the uptick is strong bonus payments across the private sector, with the largest payments in finance and business services, where the headline figure for bonus pay showed an increase of 31.2%. This was actually down a little on the previous month’s increase for this sector. Other sectors, however, showed increases on the previous headline figures, with bonus growth increasing further in each of construction (53.2%), hospitality and retail (31.1%), and services, which includes communication and transport (29.9%).

Meanwhile regular average earnings growth, which excludes the effect of bonuses, has also increased, though much less sharply than for total pay. The latest headline figure for the whole economy is 4.2%, up from 4.1% for the year to the period ending February. Regular pay growth fell back a little in finance and business services, from 6.1% to 5.7%. But it was up in other sectors such as hospitality and retail (from 5.6% to 6.1%), construction (from 3.1% to 4.1%) and manufacturing (from 2.4% to 2.6%). The regular pay figure for services was level at 4.4%.

By contrast, the public sector showed the weakest regular pay growth of all sectors, at just 1.8%, down from 2.1% in the previous release. The picture for total pay is even worse at just 1.7% (down from 2.0%). The ONS commented that: ‘The difference in total pay growth where the private sector is higher than the public sector is among the largest we have seen.’ Public sector average earnings growth was last lower in June to August 2017 when it was 1.5%.