Wage growth at fastest rate since 2021: but why don’t we feel better off?

Wages in the UK have risen at the fastest rate since 2021.  

According to the Office for National Statistics (ONS), average weekly earnings grew by 5.6% in the three months to November 2024, up from 5.2% in October. But at the same time, unemployment increased slightly from 4.3% to 4.4%.  

Payroll data from HM Revenues & Customs (HMRC) shows that in the 12 months to December, the number of payrolled employees fell by 47,000 to 30.3m – the largest drop since November 2020. 

Job cuts in the private sector may be due to rising business costs announced in the government’s autumn budget. 

Why are employers increasing pay?  

Despite job cuts, some employers may be increasing wages to keep key staff. Pay growth in the private sector has been stronger than in the public sector.  

Although higher wages can contribute to inflation, the Bank of England is expected to cut interest rates next month. Inflation fell slightly to 2.5% in December 2024. 

But that doesn’t mean prices are necessarily coming down and inflation still remains above the bank’s target of 2%. 

Why don’t we feel better off?  

Even with wages going up, many people are still struggling with the cost of living.  The price of essential items like food, bills and transport is rising quickly, leaving many feeling financially squeezed. 

In fact, nearly two-thirds of people are worried about inflation, with food, utility bills and transport costs topping the list.  

Energy and rent struggles 

Energy bills keep rising as well. The average annual energy bill has risen to £1,717, with around six million households in the UK now in fuel poverty. Bills are expected to climb further to £1,762 from April.  

Rent is also a major concern, with many renters spending a large chunk of their income on housing. The average rent in England is £1,348 per month and adding energy, water, council tax bills and other monthly costs like broadband makes managing finances even tougher. 

With an average monthly income of £2,634, renters are spending 67% of their pay on their homes alone. 

Getting help 

If rising rent and bills are leaving you struggling, there’s support out there. 

Check you’re getting the benefits you’re entitled to with our free benefits calculator. 

Get in touch with your local council to see what cost-of-living support they’re offering (all local councils in England have been given money through the household support fund to help those struggling). 

And if you can no longer afford your debts, find out how we can help. All our advice is free and impartial. Some debt solutions are also free, for others there are fees.