Workplace Report June 2007

Pay and prices

Pay deals still lag behind inflation

Pay settlements are still trailing behind inflation, with the latest figures from LRD Payline showing a median increase of 3.5% for the three months to May. This compares with the latest inflation figure of 4.3% and is slightly down on the figure we published last month for the year to April.

While the overall settlement figure is 3.5%, the median in the public sector has dropped to 2.8%, reflecting recent lower deals. There is little variation in settlements elsewhere with both manufacturing and service sector settlements averaging 3.5%, and 3.6% in the private sector as a whole.


The Retail Prices Index (RPI) for the year to May rose by 4.3%, a fall of 0.2 percentage points on the April figure. Similarly the RPI excluding mortgage interest payments (RPIX) fell to 3.3% from 3.6% and the government's preferred measure, the Consumer Prices Index, also fell to 2.5% from 2.8%.


The average earnings index rose by 3.3% in the year to April, down from the revised figure of 3.5% in the year to March. The increase in manufacturing was only 2.8% compared with the service sector average of 3.5%.

The figures excluding bonuses are very different. The whole economy increase excluding bonuses was 3.5% but manufacturing increases averaged 3.9% whilst service sector increases averaged 3.5%.