One of the last things that Theresa May did as prime minister was to announce that public sector workers will receive a pay rise in line with or above the rate of inflation, ensuring that their wages keep up with the rising costs of essentials such as food and utilities.
The current rate of inflation is 2%, and public sector workers such as teachers, members of the armed forces, police officers and dentists should all now get a pay rise somewhere between 2 and 2.9%.
While this is technically a pay rise – workers will see more money land in their bank account each payday – in real terms, it’s more a case of maintaining the status quo. If wages weren’t raised by at least the rate of inflation, then these workers would effectively be getting a pay cut. That’s because inflation means that things cost more; having more money in the bank doesn’t mean much if you can’t buy as much stuff with it.
Now that we’re coming to the end of the first half of the year, it’s likely that a lot of businesses will also be carrying out pay reviews and adjusting employees’ salaries where appropriate. It’s important to understand how well your own salary is keeping up with inflation so that you know whether you’re being offered a fair deal. If your boss comes to you with an offer that is smaller than the rate of inflation – or worse, no raise at all – then you can realistically argue that this is equivalent to giving you a pay-cut. Similarly, if you didn’t get a pay rise last year, then any pay increase this year will need to cover the inflation of both years. Otherwise, you’ll start to notice that your money is not stretching as far as it once did.
To better understand how inflation affects your day-to-day life, you can use the Bank of England’s inflation calculator. While it’s fascinating to see how much costs have changed over fifty years, you can also use the calculator to see how much costs have risen over just the past couple of years. As an example, it shows that a family spending £1,000 per month on bills, groceries and other consumables in 2015, would find themselves spending £1,089 per month in 2019 – a difference of £1,068 per year. That’s a substantial chunk of money: enough to pay off a credit card or afford a holiday.
You can also use the calculator on the Office for National Statistics’ website to calculate how much your pay needs to go up to stay in line with inflation. This is helpful because it gives you a ballpark figure to go to your manager with and start negotiations. They will also show you how much average annual pay growth is across the UK (3.4% at the time of writing), and what this means in terms of your salary.
It can be nerve-wracking to go and ask your boss for more money, but being armed with stats like these can really help. Knowing your numbers will help you to be more confident, and it will also ensure that you’re asking for a realistic sum of money. Good luck to anybody who decides to use this information to challenge their own pay!