Finance and insurance sector workers in the UK have seen their pay go up by almost a third since the start of the pandemic, new figures show.
Analysing HMRC payroll data, the Institute for Fiscal Studies (IFS) found that in February 2022 finance sector pay was 31% higher than in December 2019 in cash terms, while average pay across all sectors was just 14% higher. In particular, the pay growth in finance has been driven by high earners.
This sharp increase stands in contrast to trends between 2014 and 2019, when growth in average monthly pay in the finance sector broadly tracked average pay growth across all sectors.
With bonuses in the finance sector typically paid in January and February, the latest data could partly capture a rise in bonuses, the IFS noted. However, the gap between finance and other sectors started opening up in autumn 2021 — before bonus season — and the recent surge in pay far exceeds any seasonal trends seen in previous years.
Finance accounts for 29% of employees in the top 1% of earnings, and 44% of those in the top 0.1%. As a result, the steep rise in pay among high-earning finance workers has contributed to pushing up top pay inequality.
According to the IFS analysis, across the UK economy as a whole the highest-earning employees saw the strongest pay growth over the last two years. Between December 2019 and February 2022, monthly pay grew by 10-12% in cash terms across most of the earnings distribution, but the pay of the top 1% of employees grew by nearly 14%. Conversely, in the years leading up to the pandemic, low earners saw bigger increases in pay than those in the middle and at the top of the earnings scale.
The reversal of pre-pandemic trends towards greater pay equality may point to higher inequality in household incomes in the years to come, the IFS warned.