Despite the tightening of the labor market, earnings have not necessarily increased, especially when inflation is considered.

In the three months before July, the unemployment rate reached its lowest level since 1974, at 3.6%.

According to the Office for National Statistics, the number of employed persons increased by 40,000 during this period, although this did not necessarily result in better wages.

Regular compensation, excluding bonuses, increased by 5.2% over the period, but when adjusted for inflation, actual pay decreased by 3.9%.

The total compensation, including bonuses, increased by 5.5% during the three months but decreased by 3.6% when accounting for inflation.

Inflation is at a record high, reaching 10.1% in July, driven by rising energy and food prices.

In the period between May and July of 2022, the average regular pay increase for the private sector was 6% and for the public sector, it was 2%. Outside of the peak of the coronavirus pandemic, this is the most notable difference between the two.

Chief economist at KPMG UK Yael Selfin stated: “Despite the increase in employment, total weekly hours worked decreased from the previous quarter, leading to a decline in average hours.

“This shows that enterprises have thus far responded to decreasing demand by reducing employee hours rather than laying them off, consistent with the relatively low unemployment rate.

“As nominal wage growth has not kept pace with surging inflation, paychecks continue to be squished.

“As long as labor demand remains high, this could prompt employees to seek out better chances and higher pay elsewhere.

However, the window of opportunity may soon close if firms reevaluate their payrolls in light of deteriorating economic conditions.

The head of people policy of the British Chambers of Commerce, Jane Gratton, stated: “During an era of rising inflation and sluggish economic development, we cannot afford to allow recruitment issues to further impede expansion.

The cost of doing business problem has a substantial influence on enterprises’ capacity to invest in their personnel, thereby exacerbating the difficulties already existent in the labor market. As growing costs cause businesses to postpone investment plans, training and development budgets are taking a hit.

“Government can assist by decreasing upfront costs for businesses, offering training-related tax benefits, expanding the flexibility of the apprenticeship levy, and ensuring that job seekers have access to speedy retraining possibilities.

“Also, the Shortage Occupation List must be modified to accommodate more positions at a wider range of skill levels to provide companies breathing room to train and upskill their staff.”

Frances O’Grady, general secretary of the TUC, said: “Every worker is entitled to a respectable standard of living.

“However, as the cost of living problem worsens, millions of people do not know how they will make it through the winter.

“The incoming prime minister must increase salaries. It would be a good start to raise the minimum wage and give public sector employees a decent salary raise.

And unions should be permitted to negotiate appropriate wage increases for all workers in every workplace.