27 October 2008
Public/private sector divide in settlements as inflation begins to affect pay
The 2007-08 pay round can be described as one rule for the private sector, another for the public sector. The private sector is starting to show the marked impact of inflationary pressures, while the cap on public sector pay is keeping a lid on economy-wide figures.
Private sector negotiators achieved rises of almost 45% more than those in the public sector, with the mid point (median) of deals in the private sector reaching 4% while in the public sector the figure stood at 3%, and when weighted by numbers of employees, was only 2.75%. This strongly reflects the NHS Agenda For Change settlement (also 2.75%) covering 1.2 million staff. The upper quartile of employees in the private sector (top 25%) received rises of 6% or more*.
The findings come from the latest annual Payline survey of pay deals based on Labour Research Department's database and reflect almost 800 agreements negotiated between employers and unions in the UK, covering around 6.3 million employees nationwide. The full survey is published in the October issue of Workplace Report.
Moreover, against a background of the rising cost of living, the survey shows negotiators across the board have sought additional pay and non-pay elements such as leave and flexibility, allowances and bonuses, to add value to overall pay deals. Also noticeable is a minority trend for 'fairness' in pay, with underpinning payments for the lowest paid; and for moves against bargaining fragmentation in particular industries including the civil service and transport sectors.
Specific findings include:
Lewis Emery, who conducted the survey at LRD, commented: "Public sector pay caps have so far kept overall pay rise figures dampened down. But deals in the private sector show inflation has clearly pushed up settlements, with unions doing what they can to protect members' living standards."
Long-term deals staged over more than one year (38% of the entire sample of 765) give the clearest indicator of the effects of inflation. A significant minority of these (13% of the total sample) are existing deals linked to inflation, and these delivered rises of 4.5% at the mid-point compared to long-term deals with no inflation link and one year or short-term deals, both of which delivered 3.5% at the mid-point (median). New long-term deals this year delivered 4.1%.
According to Emery:"A not insignificant number of long-term deals linked to inflation show a clear trend, setting the pace with the highest settlement levels overall. With the number of new long-term deals holding steady these could provide a calm centre in a turbulent economy. Despite the effect of inflationary upward pressures, the 2007-08 pay round could prove to be a model of stability in comparison with the year to come."For further information about the Payline pay round survey, LRD or Workplace Report or to receive a media copy of the survey and supplement, contact 020 7902 9819 or
Notes for Editors