Pay rises slow down despite state increases

Click to follow
AVERAGE earnings growth slowed to 6 per cent in the year to June, but would be rising more slowly still if it were not for pre- election generosity to public sector workers, according to reports published yesterday.

Average earnings are growing at their slowest rate for 25 years, according to the Department of Employment. The rate dropped by a quarter of a point in June from 6.25 per cent in the previous month. The rise in prices over the same period was 3.9 per cent.

Earnings growth has fallen by 1.5 percentage points in the past three months, the sharpest slowdown since August 1981. The main factor is the low rate of pay settlements in manufacturing and services, which have averaged 4.3 per cent in the first half of the year, according to the Confederation of British Industry.

This figure is lower than the earnings rise mainly because it refers only to settlements during the period, whereas the rise in earnings still captures some higher settlements in the second half of last year.

City analysts believe earnings growth is likely to dip below 6 per cent, but may soon bottom out as pay settlements cease to exert much downward pressure.

Employment Department officials said that without higher overtime payments, the 6 per cent rate of manufacturing earnings growth would now be down to 5.5 per cent. Earnings have also been boosted by bonus payments.

The independent Public Finance Foundation said that earnings growth throughout the economy was being held up by public sector pay. It estimated that public sector earnings rose by 7.3 per cent in the year to June, while private sector earnings growth averaged 5.7 per cent.

Pay for teachers in the public sector was 9.5 per cent higher than a year earlier in June, while for nurses the figure was 7.7 per cent. In contrast agricultural workers agreed a 4 per cent rise in June, while cafe workers are to receive 4.3 per cent, down from 8.5 per cent last year.

The amount spent on wages and salaries to produce each unit of factory output - an important measure of international private- sector competitiveness - was 1.7 per cent higher between April and June than in the same three months last year. This was the smallest rise in unit wage costs in more than 4 1/2 years.