• By Check-a-Salary
  • Posted Tuesday 21 st July 2020

The Wage Impact of COVID-19

Coronavirus has had a significant impact on the UK economy. At the peak of the pandemic, where stay home orders and social distancing measures were firmly in place, the hospitality industry and areas of non-essential retail found itself at a complete standstill. Consequently, consumer spending saw a monumental shift and Britain’s GDP saw the largest drop to date. 

The knock-on effect COVID-19 has had on UK industries has also been wide-reaching, with every sector feeling the effects in one way or another - and some inevitably feeling it more than others. With restrictions being lifted, the full economic impact of the COVID-19 outbreak is still being realised. For now, however, the general consensus amongst is that it will take 3 years for the UK’s economy to recover back into its pre-Coronavirus state. 

Earlier in the year, we carried out research into the salaries of key workers to see if our frontline workers were getting paid what they deserved. Given Coronavirus’ economic repercussions for UK industries, the question now turns to the pandemic’s impact on wages up and down the country. In particular, the wages within those sectors most impacted by Covid restrictions.

We here at Check-a-Salary have conducted research into the average salaries of eight of the most impacted industries over the last two years in order to find out just that. 

Covid-19 and UK Industries

Industries hit the hardest by coronavirus have been a mixture of those on the frontlines, as well as those who have been severely restricted (or in some cases closed altogether) in the wake of government lockdown restrictions. 

The eight impacted industries we have chosen to focus on are; Cleaners, Computer Occupations, Construction and Extraction, Customer Service, Healthcare Support, Human Resources, Nurses and Retail Sales Workers.

We’ve taken a closer look at the wages within these eight industries in order to uncover the real impact the Coronavirus outbreak has had on UK wages. Here’s what we found.

The Wage Impact in the UK

By comparing salary data from 2018 to the first 6 months of 2020 we can see how wages have been impacted by the outbreak. From this, we have uncovered a few interesting changes. Within our eight industries, two actually saw salary decreases, whilst the remaining six industries saw slight increases - in keeping with the year on year increases we had been seeing prior to the Covid-19 outbreak.  

Taking into account the average salaries across the entirety of the UK, it’s nurses and cleaners who saw the most significant increases between 2018 and the first half of 2020. Cleaners saw a 7% increase in wages, with the average annual salary growing to £18,731, whilst nurses saw the average wage rise from £33,186 to £36,313 - approximately a 9% increase. Healthcare support and retail sales workers saw a respective 6% and 5% increase in average annual salary. Meanwhile, the average salary in Human Resource (HR) management rose by 4% and in customer service, it increased by 3%. 

But, which industries’ wages have fallen? 

It’s decidedly more mixed results for computer occupations and construction and extraction industries, who saw a decrease to the average wage between 2018 and the first six months of 2020. During this time, computer occupations saw a 1% decrease in wages, with the average figure falling from £46,861 to £46,277. The construction and extraction sector experienced a more dramatic 7% decline in the average annual wage, with the figure decreasing from £33,451 per year to £31,097. 

If we break the figures down by region we can see some individual differences and highlight the areas where industries have seemingly been hit the hardest. Despite these differences, however, the pattern largely remains - with computer-based occupations and construction and extraction experiencing the most notable salary declines. 

A Regional Breakdown of Salary Changes

Taken the above into account, some of the most notable salary changes occurred in the following regions: 

London 

London saw some of the most significant wage decreases in computer occupations and construction/extraction. This may or may not come as a surprise given that London had approximately 1.07 million workers on furlough - one of the highest figures in the UK. Computer occupations in London experienced a 3% decrease in wages between 2018 and the first half of 2020 (which is significantly higher than the UK average). Similarly, construction and extraction saw the average wage fall from £38,269 to £35,609 which is a 7% overall decline. 

Warwickshire

Warwickshire also saw one of the most significant decreases in construction/extraction wages. Over the last two years, the average wage in this industry fell by just over 8% from £32,137 to £29,355. In a similar fashion, computer occupations experienced a considerable decrease in the average salary, with it falling by 4% between 2018 and the first half of 2020 - a number that comes in higher than London’s average. 

North Yorkshire

In general, Northern England saw more significant wage declines within construction and extraction compared to the rest of the eight industries. In North Yorkshire in particular, the average wage in construction and extraction fell by 5%. Interestingly, however, the average wage in computer occupations bucked the UK’s overall trend and increased slightly from £35,360 a year to £35,567 a year. In industries such as HR management, North Yorkshire also saw a significant increase in wages with a 16% bump in the average yearly salary. 

Edinburgh

In the City of Edinburgh alone, there was an 11% decrease in wages within computer occupations - which goes significantly above the UK average. Construction and extraction also saw a decrease, though not quite as dramatic. Between 2018 and 2020, the average salary fell by 3% within the construction/extraction industry. Within the remaining six industries we looked at, the HR manager sector again saw one of the highest salary increases in the city, rising from £26,504 per year to £28,130. 

Glasgow

Contrary to the wage decreases in Edinburgh, the City of Glasgow actually saw minor increases across most of the eight industries - including computer occupations and construction/extraction which both experienced just under a 1% increase in average salary. In fact, the most significant decrease in Glasgow was actually in HR management, which saw the average salary fall by 0.6%. 

What is most interesting to note, however, is despite these differences between Scotland’s two largest cities, the country as a whole still experienced some of the most significant wage decreases within computer occupations. Across Scotland, computer occupations saw a 5% wage decline - one of the most substantial in the UK. 

Glamorgan

Wales as a whole followed a similar trend to Scotland, with the most significant wage decrease occurring in computer occupations. However, if we break the data down even more, we can see a slightly more nuanced picture. In the county of Mid Glamorgan, computer occupations actually saw a 3% increase in wages, whilst construction/extraction saw a decidedly less dramatic but still significant 0.1% increase. In this region, it was actually nurses whose average salary has taken a hit over the last two years, with the figure falling by 0.2%. 

However, this seems to be the exception to the rule as, when looking at the data for South Glamorgan, you can see that once again computer occupations and construction and extraction have seen the most significant wage decreases over the last two years. In computer occupations, the wage decrease totals a near 5% whilst in construction/extraction the decline is close to 4%. Throughout the remaining six industries, wages also follow a similar pattern as seen across the rest of the UK with industries like HR manager and cleaners seeing a respective 7% increase in the average salary. 

County Derry

Out of all the countries in the UK, Northern Ireland was the only one to record a small increase in seven out of eight of our industries. With a 0.2% decline, retail sales workers were the only industry to experience a salary decrease whereas industries including computer occupations and construction/extraction saw 1% and 4% increases respectively. However, despite this trend, Northern Ireland’s County Derry still experienced a noticeable wage decrease within computer occupations, in which the average wage fell from £30,736 to £29,724 - translating to a 3.2% decrease between 2018 and the first half of 2020. Likewise, in keeping with the trend seen across the UK as a whole, County Derry has also seen an increase in the average wage of Nurses, with the figure increasing by a noteworthy 13%.

 

UK Wages and Covid-19: Some Context

The context behind these changes may provide some insight into the true impact Coronavirus has had. As mentioned earlier, the UK was seeing year on year salary increases before 2020, partly due to increases to the national living wage and to minimum wage. Not only this, but in 2018 the Government introduced plans to increase the wages of NHS nursing staff - a scheme that is still being implemented. Given these facts, it’s less surprising to see the average wages increase within the majority of our eight industries. 

However, this ultimately makes the wage decreases slightly more conspicuous - though not completely inexplicable. Despite regional differences and a few exceptions, computer occupations and construction and extraction most frequently emerged as having seen wage decreases over the last two years. This ultimately indicates the effect Covid-19 has had within these particular sectors. 

During the peak of the pandemic, construction and extraction industries were one of the industries most hindered by lockdown restrictions - after all, construction and extraction revolve around workers being on-site and attending in-person. In April of this year, at the peak of government restrictions, it is estimated that 80% of UK housebuilding sites had ceased work altogether. With this in mind, it’s easier to see why, between February of 2019 and February of this year, the average wage in construction and extraction fell by 9%.  

For computer occupations, the 1% decrease in wages across the whole of the UK can at least partly be attributed to the government's furlough scheme. Under the Job Retention Scheme, over 8.7 million workers have been put on furlough - meaning they may not attend work but still receive 80% of their regular pay. With approximately 1 in 4 British workers furloughed under the scheme, it’s no surprise that this has had some impact on the average wages within certain industries. For computer occupations in particular, it’s ultimately expected for wages to grow again once employees return to work.

The fall in wages has also coincided with growing unemployment. Between February and April 2020, unemployment in the UK had risen to 3.9% with fears of this only increasing once the Job Retention Scheme finished in October. With all of this in mind, what does the future look like for wages in the aftermath of the Coronavirus pandemic? 

Looking Ahead: Predictions for 2021

Lockdown has undoubtedly caused the UK economy to contract. In April, the first full month of lockdown in the UK, there was an almost unprecedented 20.4 drop in GDP. Not only is this figure significantly higher than in the previous two recessions, but it is also the largest single drop since records began. With this in mind, it’s no wonder that thoughts are increasingly turning towards a recession.

What impact will a recession have on wages?

With a recession on the cards, businesses will look to keep costs low wherever possible - which includes lowering wages. During the recession of 2008, decreasing wages was a common sight within businesses who were trying to stay afloat, particularly in industries such as construction that relied heavily on temporarily contracted workers. 

Of course, the wage decrease didn’t exist in a vacuum and was exacerbated by other factors such as the rising costs of living, shorter working hours and a depreciation of the pound. It should be noted, however, that the 2008 recession and the consequent falling wages were also influenced by high oil prices. Given the falling oil prices in 2020, the cost-push inflation is expected to remain lower and should not contribute to a recession in the same way. 

We can also look towards the earlier recession of the 1990s to see what 2021 may bring should the UK once again fall into an economic recession. In 1990, it was housing costs and unemployment that took a larger hit. Real wages managed to remain fairly steady, but this was mainly due to an increase in unemployment and a fast increase in productivity

Ultimately, what this shows is that falling wages are not unexpected during an economic downturn which means the fall in wages we have already noted could potentially be a symptom of an impending recession. During the recession in 2008-2014, real wage growth fell to a low of -6%. In other groups, such as 18-24-year-olds, the decline was even steeper with wages falling by around 9%. The fear is that 2021 wages will reach a similar, if not lower, point if the economy cannot recover fast enough. As we saw in the 1990s, to combat falling real wages, businesses may have to look for ways to increase productivity growth, whilst separating it from inequality in wage distribution to ensure workers’ wages can grow instead of shrink. 

Essentially, as we emerge from lockdown, the hope is that the economy will begin to grow once more - however, this will also depend on factors such as oil prices, housing prices and overall spend. Ensuring the wages within UK industries do not take a big hit in 2021 thus depends on these next few crucial months as we see how the country copes with a slow return to normality. 



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