Factory wage growth drops to 30-year low: Pay settlements throughout economy unchanged at average 3 per cent

THE ANNUAL increase in earnings by factory workers fell to a fresh 30-year low of 4 per cent in the year to November, reflecting smaller bonuses, the Department of Employment said yesterday.

Average earnings throughout the economy were still growing at an underlying rate of 3 per cent in the year to November, unchanged on the previous two months. Pay settlements in the three months to November averaged 2 per cent, unchanged for the fourth consecutive month, according to a report by Industrial Relations Services.

The figures suggest that an increase in pay settlements will not put serious upward pressure on inflation for some time. But Robert Lind, economist at UBS, said wage pressure would intensify if unemployment continued to fall.

Michael Saunders, of Salomon Brothers, said that it was 'possible that there may just be one final 0.25 of a percentage point decline in average earnings still to come'.

November was another month in which earnings growth was subdued by the 1.5 per cent ceiling on increases in public sector pay. The 711,000 employees in local authority technical grades received their 1.5 per cent during November, down from 4.1 per cent a year earlier. Earnings growth throughout the service sector averaged 2.25 per cent in the year to November.

Almost all public sector workers have now settled at 1.5 per cent. Employment Department officials said it was not yet clear how the new freeze on public sector pay bills would affect the earnings figures as pay increases could be offset by cuts in staff numbers.

The Employment Department added that the number of hours of overtime worked in manufacturing had fallen to 8.11 million in November, the lowest since records began in 1976. But the fall is largely the result of continued labour shedding in manufacturing, with a further 7,000 jobs axed in November. Factory workers worked an average of 9.2 hours a week overtime in November, the same as in the previous three Novembers.

The rate of factory job shedding has slowed as the economy has pulled out of recession, but manufacturing employment is still falling because of the long-term decline in the importance of manufacturing relative to services. Manufacturing employment fell by 22,000 in the first 11 months of 1993.

(Photograph omitted)