Income tracker on the rise as minimum wage is given a boost
The latest figures from the Asda Income Tracker reveal that:
· A rise in the minimum wage boosts family spending power, which increased by 5.4% year-on-year
· Income trackers rose by £10.76 year-on-year
· Unemployment remains unchanged at 3.8%
· National living wage is lifted by 4.9%, leading to an uptake in regular earnings growth, with up to 2 million people seeing a pay increase
· Fuel inflation falls back and air fares reduce, causing transport price growth to moderate
The Asda Income Tracker is a measure of ‘discretionary income’, reflecting the amount of money remaining after the average UK household has had taxes subtracted from their income and bought essential items such as: groceries, electricity, gas, transport costs and mortgage payments or rent.
The full report can be found here
A rise in the minimum wage last month has had a positive impact on family spending power growth, boosting the income tracker by £10.76, a 5.4% increase compared to May last year.
The increase has halted a three-month long slow-down in family spending power growth, providing a welcome boost in their households’ pockets.
Moderate inflation rates and a strong labour market have also been credited for boosting family spending power, as unemployment remained unchanged in the last three months to April at 3.8%. The employment rate remained at a joint-record high of 76.1%.
Although the majority of households have seen their family spending power increase, this hasn’t been the case for everyone.
The bottom 20% of households on the lowest income have been hit the hardest by rises in gas and electricity prices, leaving them worse off year-on-year at -£35 (-1.8%) in their pockets.
This group spends a larger proportion of their incomes on utility bills compared to other household groups.
DAILY COST OF LIVING
The rate of inflation slowed down in May to 2.0%, down 0.1 percentage points from April, with the reason for the drop being accredited to transport fuel and air fares.
Transport inflation slowed last month after price increases for fuel and new cars moderated, and air fares got cheaper after the Easter holiday season.
Ofgem’s price cap lifting continued to affect price levels in May, with Gas and Electricity inflation remaining unchanged from April, which means the cost of gas and electricity continue to rise.
Families might have noticed their restaurant bill or day trip left them with less change than usual as the cost of culture, recreation, hotels and restaurants sat at a higher rate of inflation for May.
INCOME GROWTH GAP
The top 40% of earners have seen their annual income grow by 3.4% in the year to May and across all groups of earners, gross income growth stands higher than in May 2018.
Low unemployment rates have put employers under pressure to increase wages to attract workers, as well as incentivise their workers to remain loyal to them.
But, it has become obvious that lower earners have really benefitted from income increases over the past year, with the difference in income growth rates between the highest earners and the lowest falling back to 0.5 percentage points, down from 1.1 points last year.
The decrease in the gap between the highest and lowest earners has been attributed to the rise in the National Minimum Wage as well as the National Living Wage for those aged 25 and over.
Kay Neufeld, Head of Macroeconomics at Cebr said;
“The latest data show that ASDA Income Tracker growth picked up again in May after three consecutive months of slowing increases. Households benefitted from yet another strong showing of the labour market as well as a drop in the headline rate of inflation. Beneath those positive figures, however, is some cause for concern as hiring intentions have started to weaken, suggesting unemployment could rise in the future. Moreover, gas and electricity prices continue to rise sharply, especially hurting lower income consumers. It is therefore little surprise that we’ve seen the poorest 20% of households record a decrease in their spending power. “