British workers earned less between April and June than they did during the same period in 2013, despite a falling unemployment rate.
Average weekly earnings fell 0.2% – the first drop since 2009 – according to figures released by the Office for National Statistics (ONS).
Unemployment fell to 6.4% in the same period – the lowest level since the end of 2008.
The ONS said that the change was mainly due to an unusually high growth in weekly earnings in April 2013, as many businesses paid bonuses to take advantage of the cut to income tax from 50% to 45%.
The Bank of England are due to explain today in its Inflation Report what these mixed signals from the labour market mean with regards to when interest rates will be raised.
One explanation for the fall in average wages was that most of those moving from unemployment to employment are taking low paid jobs, hence lowering the average wage.
Duncan Weldon, Newsnight’s economics respondent, tweeted:
“One theory about weak average weekly earnings growth that sounds plausible: fall in average driven by compositional change in jobs. People in consistent employment seeing higher growth but more people in employment on lower wages. Fits with fall in youth unemployment
“A reminder – ‘real wages’ does not equal ‘living standards’. Real Wages down but more people in work (and their living standards higher).”
Photo by James Cridland