Pay fails to match prices

Pay settlement levels continued to rise last month, reflecting higher inflation, while private sector pay freezes are becoming increasingly scarce, according to the Labour Research Department’s Payline database of agreements. But with a settlement mid-point now of 3% for the November to January period — almost entirely due to private sector deals — workers are still chasing price inflation. This was 4.0% as measured by the Consumer Prices Index (CPI) or 5.1% as measured by the Retail Prices Index (RPI).

Average weekly earnings growth (regular pay, excluding bonuses) for the three months to December remained steady at 2.3% but “total pay” earnings growth fell from 2.1% to 1.8%.

The three-month settlement mid-point of 3% applies more or less across the board (the exceptional public sector figure of over 5% is unrepresentative as Payline recorded almost no public sector deals).

The highest increases, those in the region of 5%, include a number of rises under existing long-term deals in the private sector. But, excluding those, the mid-point among new settlements effective in November, December and January is still 3.0%; almost a third of these new pay deals increased lowest basic rates by that amount.

The VAT rise to 20% and a rising price for crude oil were two of the main factors impacting on the January inflation rate according to the Office for National Statistics. Higher prices for furniture and furnishings, alcoholic drinks and vehicles also played a part.