That’s the lowest level seen since 1974, almost five decades ago.

The data showed that the number of pay-rolled employees grew by 2.8% in August compared to the same period last year, a rise of around 800,000 over the 12-month period.

Early estimates for last month also revealed median monthly pay increased by 6.5% over the same period, which represents a jump of 13.7% since February 2020 and the start of the pandemic.

Shrinking purchasing power

Myron Jobson, senior personal finance analyst at Interactive Investor noted that total employment is below its pre-pandemic level, pointing out that unemployment falling is also driven by a rise in the number of people becoming “economically inactive”.

He said: “While pay packets are still growing faster than before the pandemic, they appear to be decelerating.

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“For many workers, the painful reality is their pay packets are not stretching far enough to cover the escalating cost of living. Despite one of the tightest job market on record, soaring inflation, which far outstrips wage growth, has led to the largest pay cuts in real terms.”

This was echoed by Alice Haine, personal finance analyst at BestInvest, who noted that when inflation is taken into account, workers have seen the purchasing power of their salaries fall 2.8%.

She said: “It means employee spending power is now severely compromised and with inflation expected to edge higher on Wednesday, when the ONS releases the latest reading, how far wages can go in the daily lives of workers will be tested once again.” 

Standing out from the crowd

Employers looking to attract new staff and retain existing workers are having to get creative, according to Louise Skittrall, founder of Robinson Grace HR Consultancy.

She noted that many businesses cannot afford to simply raise pay across the board, so are “thinking outside the box”.

“Non-monetary and low-cost options are being put in place by savvy employers. These include subsidised or free staff meals and food bank-style fridges or food baskets to enable food swaps among staff. Some employers are offering free personal hygiene products in the workplace and are negotiating staff discounts in supermarkets, food outlets and local stores,” she added.