Pay divide narrows as inflation slips

With pay settlements collated by the LRD Payline database unchanged at 2.5% for the three months to November and inflation slightly down at 5.2% the gap between pay and prices has narrowed slightly to 2.7%.

The midpoint (median) of settlements varies somewhat by sector from the overall average of 2.5%. In the three months to November settlements in the private sector averaged 2.5% but in the public sector the average was only 2.0%. In manufacturing settlements averaged 2.5% but in services it was only 2.2%.

In the year to November settlements averaged 2.9% measured simply by agreements, but if the figures are weighted by the number of workers covered by the agreements this average falls to just 1.3%. This reflects the fact that the public sector pay freeze affects agreements with much larger numbers of workers than average.

The Retail Prices Index (RPI) slipped to 5.2% for the year to November from 5.4% the previous month, and the RPI excluding mortgage interest payments (RPIX) also fell, to 5.3% from 5.6%. The government’s preferred measure, the Consumer Prices Index (CPI), also went down to 4.8% from 5.0%.

Average Weekly Earnings (AWE) rose by 2.0% across the whole economy in the year to October, slightly up on the 1.9% recorded for the previous month. This measure includes bonuses, but the same increase applies if bonuses are excluded. Services earnings were up 2.3% but in manufacturing average earnings only increased by 1.2% over the year.