The argument goes something like this: If these workers are awarded a higher pay increase (perhaps the 6% rise that trade unions are asking for), then everyone else will demand higher pay rises too, inflation will move even higher, the Bank of England will have to raise interest rates, and the recession will worsen.

But what are the chances of this actually happening?

Firstly, local authority workers are unlikely to get anything like their 6% demand. The local government employers have described the 2.45% as a "final offer".

Secondly, there are not many pay deals left this year to follow suit if a higher increase is awarded. As I mentioned on Radio 5's Wake up to Money programme yesterday morning, around three-quarters of pay awards are effective in the first half of the year (subscription required). The next big round of pay settlements will be in January 2009, and employers and trade unions will start negotiating on these deals in October and November. By that time, inflation is expected to have reached its peak and be on a gradual downward path.

The wider economic picture also has a part to play. While workers can demand higher pay increases, employers have to be able to pay for them. With prices for goods and services coming in to them also on the increase, they simply don't have the ability to pay more.

Indeed, the latest figures from the IRS pay databank show pay awards running at 3.3% (subscription required), lower than the 3.5% level seen in the first quarter of the year.

In summary, with only a minority of pay deals concluding in the second half of the year, we expect pay awards to stay around their current level over the coming months. By the time of the January wage round, inflation will be easing, as should any concerns of a wage/price spiral.

• If you would like to share details of your organisation's latest pay award for inclusion in the IRS pay databank analysis of pay awards, you can complete our short survey or email Michael Carty.