Average regular pay in Great Britain rose 7.4% in April to June 2021 from a year earlier, but the Office for National Statistics estimated underlying growth at between 3.5% and 4.9%. Its August 17 release attributed the gap to a depressed comparison period and changes in the workforce. For employers assessing wage pressure, the headline was not a clean measure of pay rises for comparable jobs. ONS cautioned that its underlying range was uncertain. [S1]

The larger 8.8% headline in the same release covered total pay, including bonuses; the 7.4% figure excluded them. Average Weekly Earnings is a mean, drawn from a survey of around 9,000 employers in Great Britain, and does not include the self-employed. It measures what employees receive per week, not simply changes in their wage rates. In spring and summer 2020, furlough and reduced hours had pushed weekly earnings down. A recovery from that low starting point could produce strong annual growth in 2021 without an equivalent increase in pay rates. [S1][S2]

To estimate that base effect, ONS used two approaches explained by Deputy National Statistician Jonathan Athow in July. One projected pre-pandemic earnings trends into 2020, creating an estimate of pay without the pandemic. The other compared 2021 with 2019 and converted the two-year change into an annual average. The first depends on a hypothetical 2020; the second assumes a constant growth rate across the two years. In August, ONS estimated that these methods would lower the regular earnings growth rate by 2.4 to 3.8 percentage points. [S1][S2]

Changes in who remained employed required a separate adjustment. Losing lower-paid jobs can raise average earnings even if nobody else receives a raise. By the August release, however, the comparison period already included much of the pandemic’s early job loss. ONS put the latest compositional effect at approximately 1.1%, against approximately 1% before the pandemic, leaving an extra effect of about 0.1 percentage point. The effect could shrink as job losses entered the year-earlier comparison; a smaller adjustment did not by itself show that the missing jobs had returned. [S1][S2]

The calculation therefore starts with regular pay growth of 7.4%, subtracts a base effect of 2.4 to 3.8 percentage points, and subtracts another 0.1 point for the extra composition effect. That produces the 3.5%–4.9% range. Subtracting those adjustments from the 8.8% total-pay headline would mix two different measures. The range is also a product of alternative methods and assumptions, not a stated statistical confidence interval or an estimate of the raise received by a typical employee. [S1][S2]

Adjusting for prices does not remove these problems. ONS reported inflation-adjusted annual growth of 6.6% for total pay and 5.2% for regular pay, while warning that both still carried base and composition effects. For a wage budget, the practical implication is to compare pay for similar roles, hours and bonus arrangements before using the national average as a benchmark. An inflation adjustment changes the purchasing-power comparison; it does not hold the workforce constant. [S1]

Source documents

  1. Average weekly earnings in Great Britain: August 2021https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/august2021
  2. Far from average: How COVID-19 has impacted the Average Weekly Earnings datahttps://blog.ons.gov.uk/2021/07/15/far-from-average-how-covid-19-has-impacted-the-average-weekly-earnings-data/