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04 May 2010

Pay freezes show clear downward trend in private sector, making public pay curbs more difficult

Any new government following the 6 May election may find it hard to sustain public sector pay curbs, new analysis of pay data from research organisation Labour Research Department (LRD) indicates.

LRD pay data shows that, following a slight increase in January this year, pay freezes in the private sector have now begun on a downward trend, while pay medians (midpoints) are slowly rising (see graph below), suggesting the end of concessionary bargaining by unions may be in sight.

An uplift in median pay levels and a reduction in the number of pay freezes, revealed in LRD's Payline database figures for the three months to April 2010, also suggests that it will be increasingly difficult to impose a pay freeze in the public sector, as all measures of inflation and private sector pay are now rising again following the recession. The Retail Prices Index (RPI) inflation measure, for example, currently stands at 4.4%.

In the private sector, the median (midpoint) pay increase according to LRD's Payline database of negotiated agreements was 2% in the three months to April, with pay freezes forming 17% of pay settlements. One quarter of private sector pay deals are now being agreed at 3% or more. In the public sector, the median was 2.3%. However, local government employers are attempting to impose a pay freeze on 1.6 million workers and the main political parties are all planning further pay restrictions.

"While we may not have seen the back of pay freezes just yet, there is likely to be greater pressure on all employers to settle for a positive increase as pay medians begin to rise," said LRD's pay and conditions researcher Lewis Emery. "Public sector unions are already very unhappy about plans to hold down wages. With the rise in inflation, and pressure from comparisons with the private sector, it may be hard for whichever party is in government after the election to keep the lid on public sector pay."

The median pay rise in the three months to April on Payline for the whole economy was 2%, with pay freezes making up 16% of settlements, the first time the proportion of pay freezes has dipped below 20% in the nine-month period of the current pay round since August 2009. The proportion was around 30% in the three months to January 2010, with the figure as high as 40% of deals in September last year.

Read the analysis of pay trends since August 2009 published in Workplace Report April 2010


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