Workplace Report (March 2007)

Pay and prices

Inflation races ahead of pay rises again

With the retail prices index (RPI) up to 4.6% - its highest level since 1991 - and pay settlements still running at 3.5% , the gap between pay rises and inflation has widened again.

The LRD Payline database shows the private sector to be running well ahead of the public sector, with settlements averaging 3.8% and 3.0% respectively, while the 3.6% median in manufacturing settlements is far above the 3.0% in services.

Inflation

All three official measures of inflation increased last month: while the all-items RPI rocketed 0.4 percentage points above its 4.2% level in the year to January, the RPI excluding mortgage interest payments (RPIX) rose from 3.5% to 3.7% and the consumer prices index (CPI) stood at 2.8% for the year to February - 0.1 percentage points above its January level.

Earnings

The average earnings index for the year to January also rose sharply, reaching 4.7%. The gap between earnings growth in the private and public sectors widened sharply, with average increases of 5.2% and 3.3% respectively. Average earnings increased by 5.3% in the service sector but only 3.0% in manufacturing.

If bonuses are excluded, the picture is very different: the whole-economy increase was 3.5%, manufacturing and services both saw average earnings increase by 3.6%, and the 3.6% figure in the private sector was only slightly ahead of the public sector's 3.2%.


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