The latest analysis of pay settlements collected by IRS [subscription required] shows that pay deals across the economy are running at 3.2% in the three months to the end of June 2007. Private sector pay awards were 3.5% over the same period, unchanged since the rolling quarter to January. Meanwhile public sector awards remain low: a median 2.7% over the 12 months to the end of June 2007.
Since the beginning of this year, private sector pay awards have been at their highest since November 1998. There is still a much higher pattern than last year - for instance more than one quarter of all pay deals in the three months to June 2007 are worth 4% or more. Pay rises of 4% or 5% are common this year: they were rare this time last year.
Yet considering that headline, or retail prices index (RPI) inflation - the measure most commonly used as a benchmark for pay awards by employers - is 4.4% in June, there is a yawning 1.2 percentage point gap between inflation and the pay rises being received by employees.
More than two-thirds of pay deals are settled between January to April and we are now entering the quieter half of the pay bargaining year. It seems unlikely that we will now see any further surge in the value of pay deals, especially as forecasters are predicting [subscription required] that RPI inflation will fall back over 2007 and early 2008.
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