Since October 2021, the UK has been facing the worst cost of living squeeze in a generation and interest rates remain at a 16-year high. Workers are continuing to grapple with higher costs that have outpaced pay increases.

The Office for Budget Responsibility (OBR) has predicted that real wages will not return to 2008 levels until 2026, and the cost of living crisis has only made things worse. In an uncertain economy, predictable and stable pay – that keeps up with or outpaces the rate of inflation – is most important to workers on low incomes and insecure jobs.

Our recent research examined the cost of living crisis and how it is shaping the way employers approach financial wellbeing at work. Building on research from a year earlier, it found that workers are feeling poorer but only 30% of employers are committing to pay rises in 2024.

Figure 1. The three phases of the cost of living crisis

Source: Work Foundation calculations using ONS CPI timeseries and PRI and PIRP data.

Today’s inflation rate stands at 2% – meeting the Bank of England’s target rate – yet higher energy and food prices are here to stay, and renters and mortgage holders have faced soaring private rents and large mortgage increases. The pressure on individuals and households alike is still very real, and so it is no surprise that the cost of living crisis was front and centre to the concerns of voters ahead of the General Election on Thursday 4 July.

In June 2024, research and consultancy organisation More in Common conducted polling on voters’ perceptions on the issues most likely to impact their choice at the ballot box. In addition, they looked at the issues they believed politicians were either talking too much about, the right amount about, or not enough about.

Figure 2. A comparison of issues that were most likely to impact voting choices in the 2024 General Election, according to voters

Source: Work Foundation estimates derived from More in Common (2024) polling of adults across Great Britian, weighted total: 2,046.

Almost six in ten voters in Great Britain (57%) agreed that politicians were not talking enough about the cost of living, in comparison to just 5% who thought they were either talking too much about it. Additionally, exactly half of voters (50%) agreed that affordable housing was not being talked about enough, in comparison to a third (32%) who believed that politicians were talking about the right amount on this issue.

The state of the nation: What are policymakers and employers doing about the cost of living crisis?

The plans and priorities of the new Labour Government were set out in the King’s Speech on Wednesday 17 July – including a New Deal for Working People and switching on Great British Energy. However, these are long-term measures and are unlikely to ease workers current concerns about the cost of living. Alongside legislation to underpin longer-term reform, the Government should also commit to helping those workers most in need with their bills by extending the Household Support Fund into 2025, which is currently due to expire at the end of September.

What are employers doing to support workers?

Alongside Government action, there is a clear role for employers. However, our Shifting Priorities research suggests that there continues to be a gap between what senior leaders think and feel, and the actions that they actually take. Our data shows that two thirds of employers (62%) agreed they have a major responsibility to support staff through the cost of living crisis, but only 38% reported that they have introduced new support since the start of 2023. In addition to this, 34% of employers say they were unable to provide financial wellbeing support in 2023.

How can employers support employees with the cost of living?

In a world where wages are worth less, it is vital that employers (alongside policymakers) continue to support with long-term financial wellbeing support, focussing on providing pay rises which match or exceed inflation wherever possible. Our research continues to find that there is an opportunity for employers to work alongside Government interventions to take a proactive approach to improve workforce health and wellbeing beyond periods of crisis. As such we recommend that senior leaders:

1. Prioritise pay increases at or above inflation – especially for lower earners – and review employment contracts to prioritise job security.

2. Take an engagement first approach and work with employees and trade unions to build a financial wellbeing strategy to deliver long-term inflation-proof wages and wider support for the workforce.

At the Work Foundation at Lancaster University, we are committed to tackling structural inequalities in the labour market. We would like to hear from any senior leaders or line managers who wish to share their experiences of supporting the financial wellbeing of their workers. If you would like to write or contribute to a blog, then please contact us at info@lancaster.ac.uk.

Related Blogs

• 

  My Easter break at Lancaster - Weaving My Story Between Two Worlds

• 

  Frosty Days, Festive Ways!

• 

  Taking student issues to Parliament

Disclaimer

The opinions expressed by our bloggers and those providing comments are personal, and may not necessarily reflect the opinions of Lancaster University. Responsibility for the accuracy of any of the information contained within blog posts belongs to the blogger.