Earnings in Scotland 2023 – recent growth but sluggish longer term
The Office for National Statistics’ (ONS) published their latest statistics from the Annual Survey of Hours and Earnings (ASHE) on 1 November 2023. This blog looks at employee earnings in Scotland and the impact of inflation.
The data for ASHE is collected in April every year. Pay As You Earn (PAYE) data is first used to identify representative subgroups of employers and employees. This group is then surveyed to get information on employee hours and earnings. As the data is based on PAYE it does not include the self-employed.
During the pandemic, the labour market underwent significant changes, and earnings were also affected by furlough. Furthermore, the 2020 and 2021 data collections suffered from a decreased response rate for the survey, which has not yet recovered to pre-pandemic levels. Due to these issues the ONS recommend focussing on long-term trends rather than year-on-year changes. Therefore, we have provided data from 2014 onwards when looking at changes over time. Also, we have only included estimates in this blog that are marked as ‘precise’ in the published data tables. Note also that the latest estimates are provisional and are likely to change slightly when they get finalised.
The main measure we use is median gross weekly pay for all employees. We use the median, the middle value of the data, as it is more representative of typical pay. This is because a mean value of earnings can be affected by a small number of high earners, increasing the value. By taking the median, half of all employees earn less, and half earn more than that figure. We look at the figure for all employees instead of full-time employees only, to reflect earnings of part-time employees as well.
The data shows that in Scotland, in April 2023, median gross weekly pay was £586. On this measure, Scottish wages were the highest of the four UK nations.
One of the biggest current economic issues is high inflation. The figures used when quoting growth in inflation are from the Consumer Prices Index including owner occupiers’ housing costs (CPIH). CPIH is the inflation measure used to adjust earnings data into real terms figures. At the time of the ASHE survey in April 2023, CPIH had increased by 7.8% compared to April 2022, which continues to be among the highest annual increases in decades; however, inflation is now decreasing again.
While inflation was high in the year to April 2023, Scottish earnings growth was higher. This means that, unlike a year ago, for the average person in Scotland, higher wages are not all eaten up by higher living costs. Earnings in Scotland grew by 11.3% in the last year, which is equivalent to 3.2% in real terms. This was more than in the UK overall, where earnings increased by 7.7% (-0.1% in real terms).
Yet in the medium term, real-terms wages still rising at a snail’s pace
Unfortunately, one year of strong earnings growth may not go very far – especially as it may be a one-off, driven by a range of factors including public sector pay rises and one-off payments. Looking at the longer term and bearing in mind that the data quality was affected during the pandemic, the slow earnings growth from before the pandemic continues. After adjusting for inflation, all four UK nations are showing only slightly higher earnings compared to April 2019.
Note that estimates for England for 2014 and 2015 were not included in the underlying data tables.
Are high earners in Scotland catching up with UK?
Looking beyond the average (median) earner, we can also consider lower and higher earners. For example, the 90th percentile in an earnings distribution means that 90% of people earn less than this amount, and 10% earn more. Here, we are looking at the 10th, 25th, 50th (= the median), 75th, and 90th percentiles.
Higher earners used to earn more in the UK overall compared to Scotland. But this gap closed in the last year. After accounting for inflation, earnings in Scotland at the 90th percentile level rose by 4.2% in a year to £1,159, whereas UK earnings at this level decreased by 1.2% to £1,170 in April 2023. Earnings in Scotland at the 75th percentile level rose by 2.2% to £857, and in the UK overall decreased by 1.4% to £837.
Low and middle earnings in the last decade have been similar in Scotland and the UK overall. Earnings in Scotland at the 25th percentile level increased by 5.4% to £403 and in the UK by 3.1% to £399. Earnings in Scotland at the 10th percentile level increased by 3.1% to £201, and in the UK by 1.1% to £197.
A glimpse at the many published ASHE data tables gives us some ideas of what is driving this strong earnings growth in Scotland.
Public sector workers saw a nominal increase in their median wages of 15.6%. This growth was stronger compared to the public sector in the UK (where the equivalent figure was 5%, lower than inflation). Furthermore, in Scotland, the public sector makes up a larger share of the workforce (over a third, compared to a quarter in the UK overall).
In terms of occupations, there were several large groups that saw strong earnings growth, for example health professionals. The ONS said that “Scotland’s high growth rate is, in part, affected by the NHS Scotland pay rises and one-off payments which were implemented in April 2023”. In addition to health professionals, educational professionals (teachers and university lecturers) and carers also saw high earnings growth.
It is plausible that the higher paid earners in these groups contributed to the recent uptick at the 90th earnings percentile in Scotland.
Continued high inflation has impacted on real terms growth in wages across the UK. While Scotland has done better than the UK overall, the real-terms growth in median gross weekly pay of 2.9% in Scotland and just 0.6% in the UK overall since before the pandemic (between 2019 and 2023) is modest. On a positive note, the higher earners’ earnings gap between Scotland and the UK appears to have closed. It remains to be seen whether these trends will continue in future years.