In the light of today’s news about cost-of-living increases…
With tax rises in April and inflation set to hit 5% someone on average earnings will need a wage rise of over 7% to keep their living standards constant https://t.co/UpkxBM1Iku
— Paul Johnson (@PJTheEconomist) November 17, 2021
“This morning the ONS announced that CPI inflation rose to 4.2% in the year to October. This is much higher than the previous month’s figure of 3.1%, and is at a level not seen since December 2011. The Bank of England expects inflation to rise further still to 5% in the spring.
When combined with the effects of recent tax changes (including the new social care levy and freeze in the personal allowance), price increases of this magnitude have significant implications for living standards. To take an example, an individual with a salary income of £30,000 in April 2021 (and post-tax income of £24,060) would need to see nominal wage growth of 7.1% to April 2022 to maintain the same standard of living given the forecast 5% annual inflation rate.”