Wages in finance have soared in recent months in the UK. This apparent good news nevertheless has a hidden side. According to a study published on Wednesday by the Institute for Fiscal Studies (IFS), this increase in income in the City has further accentuated inequalities in the country, already in the midst of a cost of living crisis.
In detail, in February, the average monthly salary of finance employees was 31% higher than in December 2019. At the same time, salaries increased only 14% across all sectors, according to the study. of the London think tank.
“Income inequality had declined for a few years before the pandemic hit, with low-paid workers seeing the highest wage growth,” says Xiaowei Xu, an economist at ISF. “The recent increase in salaries for employees in the financial sector has led to a reversal of this trend,” he continues.
“Much darker outlook”
At a time when the poorest British households are being hit by the rise in inflation to record levels in thirty years, wage increases “in the finance and insurance sector have reached levels never seen in the past few months. over the past decade,” the study details. This trend also coincides with the drop in social minima due to the decline of the Covid-19 pandemic. “The outlook for low-income households is now much bleaker,” the think tank said.
In addition, inequalities are also visible within the financial sector itself. Thus, wage increases are mainly concentrated among the highest earners, according to this study, which is based on data from the British Revenue Service (HMRC) and the Office for National Statistics (ONS).
The data could partly reflect a rise in bonuses paid most often in January and February at companies in the sector. However, the gap had started to widen before. “The data also suggests that there have been fixed wage increases,” note the study’s authors.
The explanation for this salary increase does not seem obvious. The sector is not experiencing rapid growth in activity and the labor market is tighter than elsewhere, according to the IFS. The think tank notes, however, that “some large banks have reported very strong profits, partly as a result of increased mergers and acquisitions during the pandemic.”