Wages growing faster than inflation - but only if you work in the private sector

Recovery in real-terms pay is an exclusively private-sector phenomenon as austerity maintains its grip on public-sector pay packets

(GETTY IMAGES)

Wages are rising at their fastest rate for two years but only private-sector employees are enjoying salary packets growing faster than the cost of living.

Stripping out bonuses, regular pay grew by 1.6 per cent year on year in the three months to October, the strongest rise since the three months to October 2012.

This outstripped the official Consumer Prices Index rate of inflation, which grew 1.3 per cent in the year to October and fell further to just 1 per cent in November.

But the detailed figures underline that the recovery in real-terms pay is an exclusively private-sector phenomenon as austerity maintains its grip on public-sector pay packets.

In October, private-sector wages grew 2.2 per cent year on year, more than four times as fast as the 0.5 per cent growth seen on average across the public sector.

The Bank of England’s latest minutes for December’s meeting said that recent signs of a pick-up in wage growth were “promising” but fell short of hitting its 2 per cent target.

“Further increases in pay growth, as labour market slack continued to decline, would be required to be consistent with the 2 per cent inflation target in the medium term,” the minutes said.