Private sector pay increases but public sector pay stagnates
A new report from IDSPay.co.uk reveals that private sector pay is failing to keep pace with inflation and public sector pay deals have not shown any increase at all in the first three months of 2011.
According to the study private sector pay has increased slightly this year. With the average pay increase for the three months to 30th April approaching three per cent, this is an increase on the level for the three months to March 31st of 2.5 per cent but still lags behind the current RPI inflation level of 5.2 per cent or the government’s preferred measure, CPI, which stands at 4.5 per cent.
IDS monitors annual pay settlements and said that the average increase was influenced by bigger pay increases in the auto and manufacturing sectors, but that the three per cent increase did not apply to all sectors. In many areas employees are settling for lower pay increases or none at all.
With economic uncertainty surrounding most sectors of the economy, large pay awards are increasingly rare. Most economists believe that workers can continue to expect low wage settlements.
If pay increases in line with inflation there is a danger of entering a destructive wages-prices spiral that could lead to inflation rising even faster. This in turn could influence the Bank of England’s Monetary Policy Committee (MPC) to raise interest rates if it believed that higher pay deals were causing inflation to rise.
Yesterday’s (June 1st) economic announcements showed that manufacturing output fell sharply, unsecured borrowing is rising and mortgage approvals are falling, all signs that the UK economy is continuing to struggle. Today’s announcement on activity in the construction industry will also provide an important economic indicator.
It seems that most employees are not expecting high wage increases and are happy that they still have their jobs. This means there is less pressure on employers to provide higher wage settlements.
Meanwhile, employees in the public sector, where around 490,000 job cuts were set for April, are mainly in line for no pay increases at all as a pay-freeze applies in most departments. The TUC has said that the government was making public sector workers a “scapegoat.”
The study by IDSPay.co.uk looked at 88 wage settlements covering 3.4 million employees and found that the average wage increase this year will be 2.5 per cent.
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