Household Incomes Being Squeezed Again as Wages Lag Behind Inflation
August 13, 2018
Household incomes are being squeezed again by prices rising faster than wages, according to the expectations of economic experts in the City of London.
Based on the latest projections, it’s anticipated that the Office for National Statistics (ONS) is poised to reveal that real incomes are no longer keeping pace with inflation.
That situation leaves households across the country feeling the financial squeeze and having to make their money stretch further as time goes by. Unemployment has been at historically low levels across the UK as a whole but that hasn’t always led to above inflation wage increases in recent years.
As a consequence, when energy suppliers increase their prices or there’s a notable rise in the costs of doing a weekly shop then many millions of people find themselves with diminished spending power and less money to go round on a monthly basis.
Energy prices are a key part of the picture, with British Gas having recently announced that it intends to introduce price hikes from October for 3.5 million of its UK customers.
According to a report from The Times, economic forecasters expect that the ONS will reveal this week that inflation was running at 2.6 per cent during July while the average pay packet grew by 2.5 per cent in the three months to the end of June.
“Workers are still struggling to convert very low unemployment into higher wage growth,” Robert Wood, chief UK economist at Bank of America Merrill Lynch, is quoted as saying. “At the same time, energy bills are going up. It’s a pincer movement.”
Earlier this month, it was announced that Ofgem, the UK’s energy sector regulator, was to increase the “safeguard tariff”, which is designed to protect vulnerable consumers from being charged excessive amounts of money for their gas and electricity supplies.
That decision by Ofgem is expected to result in roughly five million people having to find an extra £47 per year to cover the costs of their energy bills once the tariff increase is introduced in October.
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