City workers given 10% pay lift while low earners see only 1% rise

The highest earners in the UK, including those in the accountancy and finance sector, have enjoyed an annual pay growth of around 10% in recent months, while the lowest earners saw their pay rise by just 1%, according to new findings from the Centre for Economics and Business Research (CEBR).

According to the CEBR, many of the highest earners are concentrated in City of London jobs, particularly the finance, professional and technical industries. It found that mean pay in these industries has seen “especially strong” growth in 2022 with year-on-year increases in finance and insurance peaking at 19.8% in February and remaining “well above” 10% in the latest data. 

It noted these wage spikes are “reflective of a robust recent performance” in the sector and of the fact that workers in these industries often receive performance-linked bonuses, which represent a “significant share” of overall compensation.

Nonetheless, despite the highest earners’ strong wage growth in 2022, the CEBR said such workers are “very likely facing more challenging years ahead as economic activity and asset prices are set to tumble”.

Looking at the lowest earners meanwhile, following higher pay growth over the past couple of years, their pay has reportedly flatlined in 2022. The CEBR warned that the rate of inflation for poorest households will be even higher than the headline rate as a greater share of their expenditure goes towards gas and electricity, which is witnessing the most upward price pressure.

The CEBR further warned that additional support that is narrowly targeted at the poorest households will be necessary if they are to avoid worsening hardship, with the wage data analysis adding “further merit to that argument”. 

The CEBR said: “In the months since the cost-of-living crisis has come into focus, wage growth statistics have become of particular interest.  Two prevalent yet opposing narratives have emerged. One focuses on the significant bargaining power held by employees as they take advantage of the tight labour market to negotiate record pay rises and generous bonuses. 

“The other points to the decline in real wages and provides abundant anecdotal evidence of people in work struggling to make ends meet. With inflation ranging from 5.5% to 9.4% over the first half of 2022, even the pay rises seen at the top end of the scale mean many workers’ real pay growth is close to zero, but of course the most worrisome is the picture which emerges for lower earners.” 

It added: “They are seeing exceptionally low pay growth, making it entirely unsurprising that there are so many stories emerging of families making impossible choices, for instance between cutting down on food consumption or falling behind on mortgage payments.

“Although variation in wage growth performance between different income groups is to be expected over time, the stagnation in pay among the poorest workers is coming at a time of extraordinary price rises and their ability to dip into savings is usually limited. Hence, measures such as uprating benefits in line with current rather than earlier inflation readings should again be considered as for many, it really is the worst of times.”