High-earner pay rises threaten inflation spiral

The top 1% of earners in the UK are getting pay rises in line with inflation, while the country's lowest earners are not.

Research from the Centre for Economics and Business Research (CEBR) showed people in the 99th percentile of earners in the country have routinely had the largest average pay rises since the start of the year, peaking at 11% in March 2022.

During the same month, people in the 10th percentile of earners had an average pay rise of 0.9%.

Data from analytics company Statista estimates 99th percentile earners in May 2022 to make more than £173,000 per year, compared with 10th percentile earners who make £8,280 a year.

The most recent data from May 2022 showed 99th percentile earners received average pay rises of 9.1% – close to the 9.4% inflation across the country – as opposed to 10th percentile earners who had pay rises of 1.3%.

Pay rises in the UK:

Employees using cost of living to leverage better salary

Workers unwilling to ask for a raise despite fight for talent

Salaries failing to increase with inflation

CEBR chief executive Nina Skero said higher earners demanding higher salaries may sustain high levels of inflation.

Speaking to HR magazine, she said: "A secondary effect of the cost of living spike is that workers may begin to factor higher prices into their wage demands, thereby creating an inflationary spiral in which higher prices are sustained by higher salaries and vice versa.

"However, our analysis of pay performance shows that there is no evidence of this happening among lower earners, as annual pay growth sits well below inflationary levels. While this may be good news for those worried about an inflationary spiral, it is certainly a concern for workers whose real pay is declining."

The research showed that most of the high earners are concentrated in London, working in the finance, professional and technical industries which experienced strong growth at the start of the year.

Katherine Chapman, director of the Living Wage Foundation, highlighted the importance of companies paying all employees a real living wage.

She told HR magazine: "Everyone is feeling the pinch of the rising cost of living, but the lowest paid are disproportionately affected. As well as setting pay for those at the top of the pay scale, employers should ensure that all staff are able to live a dignified life.

"The real living wage is the only wage rate based on the cost of living and, with unprecedented rises in living costs, it’s never been more important. Over the past two years, we’ve continued to see record numbers of employers commit to a real living wage, despite the economic challenges, because they recognise it’s good for business as well as workers.

"We would encourage all employers able to do so, to accredit as a living wage employer."