According to a think-tank, base wage growth in the UK has been lower than official statistics show overall, as pay rises have been boosted by the end of the furlough scheme.

The Resolution Foundation said the pay rises were similar to pre-pandemic levels despite soaring prices, reducing the need for the Bank of England to raise interest rates to contain inflationary pressures.

Nominal wages, excluding bonuses, grew at an annual rate of 4.1 percent in January, compared with an average of 2 percent in the decade before the pandemic, according to the National Bureau of Statistics.

But analysis by the Resolution Foundation released Saturday showed official figures had increased at the end of the furlough scheme in September.

Workers on furlough received 80% or less of their regular pay, boosting growth rates when they returned to full pay.

After adjusting for factors such as furlough schemes and an increase in the number of low-wage workers as hotels and retail reopen, base wage growth will average just 2.7% in 2021, the same as in 2019 before the pandemic.

Although this Inflation is now at a 30-year high, suggesting workers are being hit by rising consumer prices. The think tank calculated that in the final quarter of 2021, about 1 percentage point of wage growth was due to furloughed workers returning to full pay.

Nye Cominetti, senior economist at the Resolution Foundation, said the headline data “gives a misleading impression of pay growth. Given the tight labor market, pay growth is best viewed as normal rather than abnormal once the effects of the end of furlough schemes are taken into account,” said Nye Cominetti, senior economist at the Resolution Foundation. ‘ he added.

The ONS is well aware of these issues, warning that it is “hard to interpret average return data at this time”. The impact of furlough schemes is waning as fewer workers were furloughed last year, but they will continue into the fall as this year’s increase is calculated compared to 2021.

According to Cominetti, this is “very important” because Wage growth rate is a key factor in the Bank of England’s monetary policy setting, especially at a time when the country is currently facing unusual price pressures.

The concern for policymakers is that high inflation expectations and a tight labor market are prompting a wage spiral that could lead to longer periods of high inflation.

The UK labour market does lack of workersUnemployment is near an all-time low, the unemployment-to-vacancy ratio is the lowest on record, and workers are voluntarily shifting jobs at a record high rate.

However, the Resolution Foundation findings suggest that despite much higher price pressures, base wages are not growing faster than they were in 2019 when the labour market was in similar conditions.

A similar model by the Bank of England, but based only on the private sector, shows higher potential wage growth than the Resolution Foundation. However, the think tank noted that in both analyses, “there is currently no evidence that pay increases will match rapidly rising prices”.

The Resolution Foundation also estimates that nominal wages will increase by an average of 5% through 2022.

That means “with inflation set to hit 8% in the coming months, real earnings for most workers will fall – even with a 6.6% increase in the minimum wage – which will further squeeze living standards in the coming months” , said Cominetti.