WAGES FALL

The average worker is suffering from the equivalent of a £750 cut in their annual pay, as official figures showed that the rise in the cost of living was more than double that of wage increases.

Figures released by the Office for National Statistics indicated that the rate of wage growth was slowing, with the average worker receiving an annual rise of just 1.8 per cent in the final three months of last year.

Workers were typically paid £456 a week in total in December.

This rate of growth was far lower than the most recent inflation figures, released this week, which indicated that the cost of living – as measured by the Retail Prices Index – has increased by 5.1 per cent. This implies that the average worker is being hit by a 3.3 per cent cut in wages in real terms, the equivalent of a £782 being wiped off the of their annual income.

Mervyn King, the Governor of the Bank of England gave the workers said "Where I do have enormous sympathy for people, is that the vast majority of people were in no way responsible for the event of the financial crisis and downturn in output yet they are now suffering a squeeze on real living standards for which the current rate of inflation is the obvious symptom.But that squeeze on living standards is going to happen one way or another. It is the price we are all paying for the financial crisis and the subsequent need to rebalance the economy. And the only question is, is it better to allow it happen with a temporary rise in prices or to push down money wages even further."

Charles Davis, economist at the think tank Centre for Economics and Business Research, said:"...Crucially, pay growth remains very subdued, implying real term pay declines for the vast majority of the UK's workforce."

Chris Williamson, chief economist at Markit, said "The weakness of the labour market ... continues to result in widespread job insecurity, meaning employees are wary of pushing for higher pay,"

Unemployment data indicated that there was an increase in the number failing to find work, especially among young people. In total unemployment rose by 44,000. There are almost a million young people unemployed in Britain - about one in five.

David Kern, chief economist at the British Chambers of Commerce, said: "It is particularly worrying that the number of people who are working part-time because they could not find a full-time job, and the number of young unemployed, both rose to the highest level since records began. UK unemployment will rise by a further 100,000 over the next year."