Public sector freeze hits

The gap between inflation and pay settlements has widened again.

The latest figures from the LRD Payline database of collective agreements show a drop in the median (mid-point) of all settlements. The median for the three months to April was 2.4%, down from the previous three monthly median of 3.0%. While the median in the private sector dropped from 3.0% to 2.8%, the public sector median was 0.0% (zero), dragging the overall median down further.

The annual median weighted by numbers of workers covered also dropped, from 1.8% to 1.5%, again influenced by the large number of workers affected by public sector pay freezes.

Meanwhile inflation continued largely unabated; the RPI (Retail Prices Index) dropped marginally to 5.2% in the year to April compared to 5.3% the previous month. RPIX (excluding mortgage interest payments) also dropped marginally to 5.3% from 5.4%. The government’s preferred measure, the CPI (Consumer Prices Index), rose sharply to 4.5% for the year to April from 4.0% in the year to March. So whichever measure of inflation you use, pay rises trailed way behind inflation.

The government’s official statistics on average earnings (Average Weekly Earnings) show that, including bonuses, earnings in the year to March rose by 1.7% across the whole economy. In the public sector earnings rose by 2.5% but in the private sector they only rose by 1.6%. In manufacturing earnings rose by only 0.5% while in services the average increase for the year was 2.5%.