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24 September 2012

Pay gap now closed on prices - but can pay deals hold up?

The gap between pay and prices has closed, but both figures show falls this month.

The Labour Research Department's Payline database shows a 2.9% median rise in settlements in the three months to August across the economy as a whole. The median is marginally down on the 3.0% trend for the earlier months of 2012.

The gap between inflation and wages finally closed over the summer, after a period in which the cost of living rose much faster than pay. That potentially gives employees a chance to keep up with rising prices. But a fall in settlement levels - if sustained - will not help raise spending power.

It's important to remember that median settlements vary by sector: the private sector saw average increases of 3.0% in the three months to August - no change on the figure for the three-month period ending July. But most of the public sector is still covered by the pay freeze policy - the average increase of 1.6% reflects salary rises payable only to the lowest paid.

In industrial settlements, increases averaged 3.0% for August - the same figure for the rest of 2012. In services, the median was down to 2.5% from 2.9% in three-month period to July.

Lewis Emery, pay researcher at the Labour Research Department, said: "The hope will be that in the new pay round inflation will continue to fall, while average pay rises at least maintain their present level. This would help workers make up some of the loss of earnings they suffered through the double-dip recession."

Notes for editors
  • For further information contact Lewis Emery

  • The figures in this release are as published in the latest edition of LRD's
    Workplace Report magazine.

  • Updated figures on available on LRD Payline - LRD's database of negotiated agreements reported to LRD by unions. It includes more than 2,300 agreements with information on pay, terms and conditions and other aspects of the employment contract.

  • Pay settlements are negotiated rises on basic pay, and exclude bonus, increments, overtime and other allowances.
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