INFLATION has continued to erode the value of people’s pay packets, despite wages rising at their fastest rate in more than 20 years, according to official figures.

The Office for National Statistics (ONS) reported regular pay rose by 5.7 per cent across the UK in the year to September, thanks to people returning to work after Covid furlough.

However with the cost of living rising at its fastest for 40 years, those wages rises were eclipsed by inflation, meaning real pay fell by 2.7%.

Unemployment rose in the last quarter, both at a Scottish level and UK-wide. 

Between July and September, the unemployment rate for the 16 to 64 age group was 3.5% in Scotland, up 0.3 points on the previous quarter, with 98,000 Scots out of work.

Across the UK, the unemployment rate was up 0.1 points to 3.6% in the last quarter.

Median monthly pay in October in Scotland for payrolled employees was £2,143, up 5.5% on the previous year, and up 14.2% since February 2020, the last month before the pandemic.

The Fraser of Allander Institute warned the number of men in Scotland becoming “economically inactive” hit a 20 year high because of increasing rates of ill-health.

More than a fifth of men, 21.1%, were economically inactive in Scotland, up 1.2% on the quarter and 1.5% in a year, with the UK rate in the last quarter just 18.1%.

The category includes those not seeking work in the last month and not available for work within the next two weeks, and includes students, carers, the sick and disabled, retired people and “discouraged workers”, who have given up looking for jobs.



Darren Morgan, director of labour and economic statistics at the ONS, said: “The proportion of people neither working nor looking for work has risen again.

“Since the onset of the pandemic, this shift has largely been caused by older workers leaving the labour market altogether, but in the most recent quarter the main contribution has actually come from younger groups.

“August and September saw well over half a million working days lost to strikes, the highest two-month total in more than a decade, with the vast majority coming from the transport and communications sectors.

“With real earnings continuing to fall, it’s not surprising that employers we survey are telling us most disputes are about pay.”

He added: “Job vacancies continue to fall back from their recent peak, with increasing numbers of employers now telling us that economic pressures are a factor in their decision to hold back on recruitment. The biggest driver behind the fall came from hospitality, followed by retailing and wholesaling.”

Chancellor Jeremy Hunt said tackling the inflation that was eroding people’s real pay would be his “absolute priority” in Thursday’s autumn budget statement.

“Unemployment remains near record lows – providing security to families and testament to the resilience of the British economy even in the face of severe global challenges.

“But I appreciate that people’s hard-earned money isn’t going as far as it should. 

“Putin’s illegal war has driven up inflation - a hidden and insidious tax that is eating into paychecks and savings.

“Tackling inflation is my absolute priority and that guides the difficult decisions on tax and spending we will make on Thursday. Restoring stability and getting debt falling is our only option to reduce inflation and limit interest rate rises.”

SNP Shadow Chancellor Alison Thewliss MP said: “Families in Scotland are paying an increasingly high price for Tory incompetence - as real wages fall and the cost of living soars.


“With Brexit fuelling rising costs and long-term economic decline, independence is the only way to escape the damage of Westminster control and get Scotland back on the path to prosperity.

“Neither the Tories or Labour Party can be trusted to fix a crisis they have created by imposing Brexit - the biggest and most devastating long-term cause of the UK’s economic decline.

“The UK budget must deliver a boost to incomes, energy bill support for low and middle income families, a real Living Wage, and extra investment in the NHS to help people weather the storm.

“But the only way to keep Scotland safe from Brexit, and grow our economy, is to become an independent country.”

Labour’s Shadow chancellor Rachel Reeves added: “Real wages have fallen again, thousands of over 50s have left the labour market and a record number of people are out of work because they’re stuck on NHS waiting lists or they’re not getting proper employment support.

“What Britain needs in the Autumn Statement on Thursday are fairer choices for working people, and a proper plan for growth.”

Professor Stuart McIntyre of the Fraser of Allander Institute at the University of Strathclyde said the outlook for the Scottish economy was “less positive” than the labour market data.

He said: "It is clear that the Scottish economy is heading into an exceptionally challenging period, with widespread expectations of a decline in employment and a substantial rise in unemployment over the next year. That’s why it’s crucial that policymakers start working now on how to support people through the difficult months that lie ahead.

"One rising issue of concern in the Scottish labour market is the growing rate of economic inactivity amongst men, now at 21.1%, its highest rate since the current data series began in 1992. There are a number of reasons, both good and bad, for economic inactivity but a particularly worrying one at the moment is the rise in those who are economically inactive because of illness. 

“A rise in economic inactivity because of long-term sickness is something that is being seen across the UK. 

“Addressing some of the population health challenges that exist and that limit labour market participation has to be a key objective of the Government over the period ahead.”