August UK Labour Market Preview: Wage Growth is High – but Inflation is Higher


August 11, 2022

The only constant in 2022 is change – and skyrocketing prices. Even with high wage growth and a tight labour market, UK workers are feeling the pinch as inflation emerges the biggest winner. 

That’s likely to continue in August’s labour market overview, out next Tuesday from the Office of National Statistics. With vacancy growth slowing for months now, this may be the month the number of job vacancies finally falls. Even once this happens, that doesn’t mean employers can rest easy: hiring will remain difficult, with fewer unemployed people than the number of jobs available. 

Here are three trends we’ll be watching for in the ONS August labour market overview:

  • Job vacancies will remain near record highs, meaning hiring will remain difficult for employers. Month after month, job vacancies have steadily grown to hit new record highs as employers have been unable to meet consumers’ demand with enough employees, especially in fields like hospitality or travel. As the cost-of-living crisis hits consumers’ wallets, consumer spending is starting to fall and people are returning to the labour market.  While these difficulties in hiring are unlikely to ease overnight, expect vacancies to fall in the months ahead.
  • Wage growth in the private sector will outpace the public sector, with inflation outpacing both. Public sector pay has fallen far behind private sector pay for the past year and a half. We don’t see this changing anytime soon, as private industries raise pay to attract employees in a tough hiring environment while fiscal pressure prevents high pay rises in the public sector.  No matter the sector, inflation comes out as the biggest winner, as it nears 10 percent. 
  • Unemployment and economic inactivity are likely to fall, with people returning to the labour force as a result of the cost of living crisis. A tight labour market in combination with a once-in-a-generation cost of living crisis means more people returning to the labour force to look for work – but also more jobs available for them. Expect to see economic inactivity dropping as those currently not looking for work start to feel the need to bring in more cash, though inactivity rates are unlikely to return to pre-pandemic norms anytime soon. 

Complaints about Salary are Surging Among Public Sector Employees on Glassdoor

Examining more than 700,000 reviews by UK-based employees on Glassdoor, negative mentions of salary (and related words like pay or compensation) have grown 16 percent since 2020, with most of that growth coming in 2021. Zooming in on reviews from employees in particular industries, however, the picture begins to look a bit different.

With relatively low pay growth and fiscal restraint on the horizon, it’s no surprise that reviews among government workers have seen the largest increase (+26 percent from 2021 and +42 percent from 2020) in salary complaints. In 2020 and 2021, government employees were less likely than most employees to discuss salary negatively – but in 2022, they shot to near the top. This could mean an exodus of government workers to other jobs in the future.

Hospitality (restaurants, food service, travel and accommodation) employees, who have seen unusually high pay growth, show the opposite pattern, with salary complaints dropping. 

Hospitality and Healthcare Employees are Overworked and Understaffed

Government employees stand out in a different way when looking at mentions of workload-related words (including overworking, overworked, undermanned, understaffed, and so on) in Glassdoor reviews. Though they’ve seen an increase in discussions since 2020 (+ 21 percent), their share of reviews falls below most other industries, especially hospitality and healthcare – sectors that have seen an exceptionally high increase in job vacancies. 

These latter two industries had high rates of discussion about workload even in 2020, before their steep rise in job vacancies – implying that the issue of overwork may be a vicious circle. In a robust job market, employees are less likely to work in overworked (and relatively low-paid) industries like healthcare or hospitality, leaving pre-existing employees to pick up the slack from the resulting job shortages. 

Healthcare employees have had an especially tough time, with mentions increasing 27 percent since 2020. The introduction of vaccines in 2021 do not seem to have eased their workload much, with the backlog of health-related cases and increased shortage of employees taking any remaining slack. 

Conclusion

Despite the robust labour market and high nominal pay growth in many industries, many workers feel overworked and underpaid. In industries with worse labour shortages, like healthcare and hospitality, employees are more likely to report feeling overworked and understaffed. On the other hand, negative discussion about compensation shows the opposite patterns, with high pay growth and fewer complaints in industries like hospitality, versus low pay growth and more complaints in the public sector. Below-inflation wage growth and high, though slowing, job vacancies are likely to continue in August’s labour market overview. 

To speak with Lauren Thomas about this report, please contact pr@glassdoor.com. For the latest economics and labor market updates follow @LaurenTEcon on Twitter, connect on LinkedIn, and subscribe to Glassdoor Economic Research.