Pay growth is picking up, official figures showed this week, but for key workers on the pandemic frontline the champagne is firmly on ice. The detail behind annual pay growth of 4.9% in December revealed the gulf between the size of awards being handed to public sector workers, and those in the private sector, boosted in part by swelling banker bonuses. At the headline level, private sector wage growth including bonuses picked up to 5.4% in December, more than double the 2.5% growth rate in the public sector, according to the Office for National Statistics. With inflation running at 5.4% in the same month – and expected to rise to more than 7% by April – the squeeze on incomes is already a reality for many of those keeping public services running in the most challenging conditions. Workers in the finance and insurance sector enjoyed annual wage growth, including bonuses, of 21.6% in December – quadruple the rate of inflation. Fuelled by a bumper bonus season in the City, the figure represents the biggest jump since January 2011. Excluding one-off awards, finance and insurance pay still rose at an inflation-beating 7%. Meanwhile, wage growth in real estate soared by more than 14%. In contrast, pay growth for health and social workers was below the rate of inflation at 4.5%. Progress on pay was worse still in public administration, at 2.1%, and was just 0.3% in the education sector. Pay in the arts, entertainment and recreation fell by 6.9% before inflation is even taken into account. “The good times may be back for the City. But it’s a different story for everyone else,” said Frances O’Grady, the general secretary of the TUC. “While banking executives coin it in, millions of families are suffering the worst squeeze on real wages in more than 200 years. At a time when ordinary people are being told to tighten their belts and not ask for a decent pay rise, there is no justification for these kind of bumper payouts.” NatWest was the first big UK bank to report its annual bonus pool on Friday, increasing it by 44% for 2021 to nearly £300m after returning to profit. Chief executive Alison Rose said the bank had shown “significant restraint” but had to pay fairly in a competitive market. London’s big four banks – HSBC, Barclays, Lloyds Banking Group and NatWest – are expected to pay bonuses totalling more than £4bn for 2021, and make profits of more than £34bn – the most since 2007 in the boom before the financial crisis. Official figures show that average weekly pay was still £1 below the 2008 peak in December 2020. Disposable incomes are expected to fall at the fastest rate this year since at least the early 1990s, while a study by the Institute for Fiscal Studies suggests the average UK worker will be about £13,000 a year worse off by the middle of the 2020s than if wages had grown at pre-2008 financial crisis rates. The figures come after the Bank of England governor, Andrew Bailey, called for workers to show restraint in the annual wage-setting process to prevent higher rates of inflation from becoming embedded. His comments drew a furious response from unions, as well as a rebuke from No 10 and the chairman of Tesco. Some economists question whether workers have the bargaining power to demand higher pay despite low levels of unemployment after lockdown, highlighting a sharp fall in trade union power in recent decades. Others say pay conditions are stronger than at any time for at least a decade. With tighter restrictions on workplace organisation and changes to the structure of the British economy, trade union membership has fallen sharply from a peak of about 13.2 million in 1979 to about 6.6 million, representing about a quarter of the workforce. “The idea of [inflation] getting embedded is for the birds,” said Danny Blanchflower, a former member of the Bank’s rate-setting monetary policy committee, who is critical of its current position. “The reason in the 1970s that it got embedded after oil prices rose was a huge rise in unionisation rates. The 70s were unique in that unionisation rates rose by 10 points around the world. What makes you think suddenly that’s the case now?” Some sectors with the worst staff shortages are recording higher rates of pay growth, according to economists at the jobs website Indeed, including for lorry drivers, chefs and construction workers. However, this pressure is not widespread. In one example of weaker than average pay growth, the supermarket chain Asda last week announced a sub-inflation deal to raise pay by 3.25% to £9.66 an hour, or £10.83 for employees in London. Asda said it would go further to £10.06 in April 2023 – a deal it argued “in the current environment provides reassurance for colleagues”. However, the supermarket could be forced into a rethink. Forecasts from the Low Pay Commission, which advises the government on the national living wage, suggest the legal pay floor could rise to £10.18 from 2023. The current rate of £8.91 is set to rise to £9.50 from April this year – a jump of 6.6% which had been expected to be inflation-busting until recently. Nadine Houghton, a national officer at the trade union GMB, said a lack of proper union recognition meant the firm could force staff to accept a pay deal below the industry average. Asda has an agreement with the Usdaw shop workers union for staff in Northern Ireland but does not allow for negotiations on pay with GMB in Great Britain. “Where workers have [unionisation] there is an opportunity to improve wages and everything else. Where they don’t – which is the case for pay and conditions at Asda – the cost of living is going to dramatically outstrip wages,” she said. Asda said it was the only supermarket to offer a bonus worth several hundred pounds a year on average, as part of a comprehensive benefits package. The lacklustre pay figures for the public sector come as unions push for an inflation-busting wage deal for the NHS to halt a rise in staff departing the health service after more than a decade of real-terms cuts for many employees. Christina McAnea, the general secretary of the Unison trade union, said a key lesson from the Covid-19 pandemic was that well-resourced, properly staffed services were essential. “It’s depressing, but not surprising, that City wages are way ahead of public sector pay in the race against rising prices,” she said. “Companies struggling to recruit are paying a wage premium to keep and attract staff. The government must find the cash so health, care, council, police and school employers can do the same.”