Earnings in Scotland 2023 – recent growth but sluggish longer term
Estimated Time to Read: 5 minutes As a reader, you may find this section of the blog interesting. It should take about 5 minutes to read through.
On November 1, 2023, the most recent data from the Annual Survey of Hours and Earnings (ASHE) was released by the Office for National Statistics (ONS). This blog examines the earnings of workers in Scotland and how inflation has influenced them.
Every April, ASHE gathers information through a survey. They use Pay As You Earn (PAYE) data to find particular subsets of employers and employees. Next, they ask this group questions about how many hours they worked and their earnings. Keep in mind that the information they collect only pertains to those who are paid through PAYE and does not take into consideration self-employed individuals.
The job market had big changes due to the pandemic, and people's salaries were impacted because of being furloughed. Additionally, surveys conducted in 2020 and 2021 got fewer responses than before and haven't returned to pre-pandemic levels. Because of this, it's recommended to focus on long-term trends instead of yearly ones. Here, we have data starting from 2014 to see how things have changed over time. This blog only includes exact estimates marked as "precise" in the published data tables. Keep in mind that the most recent estimates aren't final yet and may change slightly.
To gauge the typical pay of our employees, we rely on the median gross weekly pay. This measurement takes the middle value of the data, making it a more accurate representation of typical earnings. Unlike the mean, which can be skewed by a few highly paid individuals, the median shows the point at which half our employees earn less and half earn more. To get a complete picture of employee earnings, we consider pay for all employees – not just full-time workers – including those who work part-time.
Top Wages In UK Found In Scotland
According to the information provided, the middle point of the weekly pay scale in Scotland for April 2023 was £586, which is observed to be the greatest among the four nations that make up the United Kingdom.
One of the major problems in the economy today is the high level of inflation. The statistics regarding inflation growth are based on the Consumer Prices Index with owner occupiers' housing costs (CPIH). The CPIH is utilized to transform earnings information into figures that reflect real terms. In April 2023, during the ASHE survey, the CPIH grew by 7.8% as compared to April 2022. This is one of the highest annual increases in many decades, but there is a decline in inflation again.
Scotland's Earnings Surpass Inflation With Strong Growth
Inflation reached a peak in April 2023; however, the growth of wages in Scotland was even greater. This implies that an ordinary individual in Scotland will have fewer troubles with living expenses when compared to last year. Scotland's earnings witnessed an upsurge of 11.3% in the past twelve months, which is equal to 3.2% in practical terms. This growth was higher than that of the whole of the United Kingdom in which earnings increased by 7.7%, but it did not match the inflation rate (-0.1% in practical terms).
Slow Wage Growth Persists In Mid-term
Regrettably, having a year of substantial earnings improvement may not have a lasting impact, particularly as it could possibly be a solitary occurrence, fueled by various factors like public sector increments and one-time payouts. Considering the future and acknowledging the fact that the pandemic has had an impact on the quality of data, the sluggish earnings progress that existed before the pandemic persists. When accounting for inflation, the earnings of all four regions within the UK have only slightly improved compared to April 2019.
Please take note that the data tables used do not contain the estimates for England during the years 2014 and 2015.
"Scottish High Earners Catching Up With UK?"
If we examine individuals who earn less or more than the typical income (which is represented by the median earner), we broaden our perspective. To illustrate, the earnings distribution's 90th percentile reveals that 90% of individuals earn an amount that is less than or equal to this value, while the remaining 10% earn more. In this context, we explore the 10th, 25th, 50th (which is equivalent to the median), 75th, and 90th percentiles.
In the past, people who earned a higher salary in the UK used to make more money than those in Scotland. However, this gap has now narrowed down in the last year. When taking into account inflation, individuals in Scotland who fall under the 90th percentile bracket saw an increase in their earnings by 4.2% within a year, bringing their total earnings to £1,159; while those within the same bracket in the UK experienced a decrease in earnings by 1.2%, bringing their earnings to £1,170 as of April 2023. For individuals who fall under the 75th percentile bracket in Scotland, their earnings experienced an increase of 2.2%, bringing their total earnings to £857; whereas the earnings within this bracket for the UK as a whole decreased by 1.4%, bringing the total to £837.
The income of those who earn less than average in Scotland and the entire UK is alike in the past ten years. Those who earn at the 25th percentile level in Scotland gained 5.4% and received £403 while those in the UK gained 3.1% and obtained £399. Individuals who earn at the 10th percentile level in Scotland gained 3.1% and got £201 whereas in the UK, those who earned the same had a 1.1% rise and received £197.
Scotland's Doctors And Teachers Fuel Robust Earnings Growth
When we take a quick look at the numerous ASHE data tables that have been released, we can get a peek into the factors that are contributing to the impressive increase in earnings in Scotland.
Workers in the public sector experienced a slight uptick, or nominal increase, in their median wages by 15.6%. This growth was more significant than the public sector in the United Kingdom, which saw a lower figure of 5% and was below inflation. Moreover, in Scotland, the public sector employs a more substantial proportion of the labor force, accounting for over a third compared to a quarter nationwide.
Regarding jobs, there were some significant categories that experienced a substantial increase in earnings such as those in the healthcare field. As per the ONS, "The rise in Scotland's economic growth can be attributed partly to the salary hikes and exceptional payments given by NHS Scotland during April 2023." Along with health professionals, people working in the education sector (such as teachers and professors) and care providers also witnessed noticeable hikes in their salaries.
It's possible that the individuals earning higher salaries in these groups played a role in the recent increase at the 90th percentile of earnings in Scotland.
Wages in the UK have been affected by persistent inflation, resulting in limited growth in real terms. Although Scotland has fared better compared to the UK as a whole, the increase in median gross weekly pay of 2.9% in Scotland and only 0.6% across the UK from 2019 to 2023 is not particularly impressive. However, the earnings gap between high earners in Scotland and the UK seems to have lessened, which is a positive development. The coming years will determine whether these trends persist or not.
Charts in this blog were created using three different data sources: the ONS time series tool, the ASHE 2023 tables, and the CPIH.
Maike Waldmann is a statistician who is part of the team at SPICe.
