What's going on?

Wage growth in the UK is slowing down at the same time as prices are ratcheting up � which isn�t a good combination for your wallet or for the economy.

What does this mean?

First, the good news: unemployment in Britain is at a historic low. Conventional wisdom says that lower unemployment should equal higher wages (since there are fewer available workers, firms must pay more).


The bad news is that this isn�t happening in the UK (something similar is going on in America). To make matters worse, UK inflation has picked up, partly due to the post-Brexit weakness of the pound. That means that inflation is edging up while wage growth is slowing down � so �real wages� (i.e. the value of your wages after inflation) are growing at a slower pace!

Why should I care?

For you personally: Inflation eats away at the value of your money.

Wages in the UK increased by 2.3% in the first three months of 2017, but after adjusting those numbers for inflation, real wages only increased by 0.2% � the slowest growth since 2014. That means any bump in the size of your paycheck has been almost entirely offset by price increases at the grocery store, restaurants and elsewhere. And, if inflation keeps on increasing in the UK, as is expected, then the value of your paycheck will actually begin to decline unless wage growth picks up.

For the markets: Declining real wages are bad for companies that sell �discretionary� goods to consumers.

If real wages start to go down in the UK, that�ll be bad news for companies that rely on British consumers� discretionary income (i.e. the money they�ve got left over after paying for essentials like rent and groceries). The pain already seems to be feeding through: earlier this week, UK retailers suffered a third consecutive month of falling sales. Since consumer spending makes up such a large part of the UK economy (about two-thirds), a poorer British consumer is likely to hurt overall economic growth.