In response to the Pay as You Earn (PAYE) statistics released today, Xiaowei Xu, a Senior Research Economist at IFS, says:
"There has rightly been a lot of focus on what today’s figures tell us about average earnings. But what they tell us about the relative winners and losers in the post-pandemic labour market is much more revealing.
The latest PAYE data shows that in March 2022, average (mean) earnings in finance were 25% higher than in December 2019 in cash terms. This is lower than the peak in February, when huge bonuses were paid, but still considerably higher than the 15% earnings growth seen across the whole economy. Average earnings in professional services and IT, two other high-paying sectors, were 21% higher in March 2022 than in December 2019.
The top 1% of earners saw a sharp increase in pay between February and March 2022, of 2.3% in cash terms, compared to 0.5% for the median earner and just 0.1% for the bottom 10% of earners. This exacerbates the trend towards greater earnings inequality that we’ve seen since the start of the pandemic – in contrast to the years before the pandemic, when the lowest-paid saw the biggest pay rises. The latest jump seems to reflect a rise in bonuses, and it remains to be seen whether this trend continues. If so, for all the talk about labour shortages driving up low pay, the legacy of the pandemic may be greater earnings inequality."
Figure 1. Mean nominal monthly pay indexed to December 2019, selected sectors
Figure 2: Average growth in nominal monthly pay by percentile of pay