Pay rises for finance workers widen inequality, says IFS Business News

Wage increases for financial sector workers could lead to “greater household income inequality,” suggests an analysis from the Institute for Fiscal Studies.

Wage growth has been relatively stagnant in recent years, except for workers in areas such as banking or insurance. According to the study, this trend could signal the reversal of a pre-pandemic trend towards greater pay equality across sectors. Indeed, across the economy, the highest earners have also experienced the strongest wage growth over the past two years.

“The reversal of pre-pandemic trends towards greater wage equality may imply greater household income inequality in years to come,” the IFS said.

As finance workers tend to be among the highest paid employees in the UK, if their pay rises, it further accentuates pay inequality. The sector accounts for 29% of employees with the top 1% earners, the IFS said.

Weaker wage growth among the lowest earners, benefit increases below inflation and the scrapping of the £20 Universal Credit increase mean the outlook for low-income households ‘is now much bleaker “, said the IFS.

“In contrast, strong wage growth among top earners could push up the top 1% share of household income, which has been flat for several years,” he added.

In February 2022, the average salary in finance was 31% higher than it was in December 2019, before taking inflation into account. Meanwhile, the average salary across all industries was only 14% higher. This implies a real increase of 23 percent and 7 percent respectively according to the analysis of IFS wage data.

The relatively strong wage increase has not been accompanied by a clear shortage of finance workers – relative to the rest of the labor market. There has also been no sudden increase in productivity, according to the IFS.

Wage increases in the financial sector also do not appear to be the product of bonuses in the sector, which can skew wage data, according to the analysis.

Indeed, “the gap between finance and other sectors began to widen in the fall of 2021 – before bonus season – and the recent increase in wages far exceeds any seasonal trends that can be observed. previous years,” the IFS said.

The findings come after the Prime Minister was forced to admit that the existing measures announced in the spring statement are not enough ‘to cover everyone’.

Boris Johnson made the admission in reference to measures such as a council tax refund to help ease the pressure of a 50% rise in energy bills.

“I accept that these contributions from the taxpayer – because that is what it is, taxpayers’ money – will not be enough immediately to help cover everyone,” the Prime Minister said on ITV. Hello Brittany.

He added: “We are doing everything we can to help deal with the pressure on family budgets and I completely understand and understand what people are going through.”