Pay Pressures: National picture masks increases for big earners

A wide range of people with special qualifications and even workers without skills in areas of high employment are currently enjoying the benefits of soaring wage inflation. Barrie Clement, Labour Editor, reports on a trend which official data has failed to pick up.
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National figures showing pay settlements gently nudging upwards tell only part of the truth. Reports that wage increases are hovering around the relatively modest 3 to 4 per cent mark serve to draw attention away from the double-digit rises increasingly awarded to a wide range of employees.

Even the more sophisticated data from the Government on average earnings - currently showing an upturn of 4.25 per cent - fails to detect the hidden wage inflation which has attended the end of the recession and the growing disparity between the "winners" and "losers".

Most official figures monitor the remuneration of employees, but a burgeoning labour force of freelance, "portfolio" and subcontracted workers means that the data is of increasingly limited use. The Government could well be faced with a far stronger surge in pay than has so far been detected.

Broad analysis of wage deals shows pay edging up slightly ahead of the 3.3 per cent inflation rate, but certain professions and a broad sweep of people with supervisory skills are enjoying something of a boom.

Information technology specialists in the big cities are commonly receiving rises of 10 per cent in order to prevent them leaving. To attract new computer staff, salaries at organisations are often up by 15 per cent.

Salary increases for those who are simply computer literate are running between 5-10 per cent nationally. For freelance analysts and programmers with the special skills needed to enable computers to cope with the the millennium, firms in the City are now paying some pounds 60,000 a year - up 20 per cent on last year, according to Nick Robeson of recruiters Harvey Nash.

Building site managers are also benefiting from the upturn in construction and have been the beneficiaries of 10 per cent rises or more. Bricklayers in London have seen hourly rates move up from pounds 6.50 to pounds 9.50.

The hidden increases have been detected by a section of the Bank of England, which prepares business intelligence for the bank's senior decision-makers. In an unreported section of its latest "summary of business conditions" the bank's officials reveal strong undercurrents of wage inflation.

The bank has spotted surges in the pay of graduate financial services staff, with some individuals hopping from job to job in the city for 30 to 35 per cent increases.

Lawyers with expertise in commercial disciplines are also one of the beneficiaries with rises of 20 per cent common. Gareth Quarry, chief executive of Quarry Dougall, specialist recruitment agency, pointed out that far fewer young people trained in commercial law during the recession and consequently there is now a scarcity.

Demand has been exacerbated by the arrival of American firms who are paying up to pounds 65,000 a year for newly qualified entrants compared with around pounds 30,000 on offer from domestic partnerships.

Legal recruitment specialists Taylor Root reports that while in 1996,18 per cent of legal departments increased in size during the previous year, this year 29 per cent of companies have taken on more lawyers.

In the service sector - especially in the leisure and hotel industry - management has been forced to award interim pay increases to ensure salary levels are keeping pace with those offered by rivals.

There are considerable regional variations. In areas of high unemployment in the Wales, Scotland and the North-east, companies are still inundated with applications for all jobs. Here rates are staying at the low levels to which they descended during the recession.

In Cambridge and Crawley in southern England, where unemployment is negligible, even unskilled clerical workers have seen salaries increase by 10 per cent. Where companies establish "call centres" - essentially white-collar factories which deal with customers over the telephone - pay rates for clerical staff are driven up.

Alastair Hatchett of Incomes Data Services, argues that wage inflation could continue to spiral in some occupations as the economy overheats and shortages worsen. Pay increases are also being pushed up by higher inflation, four successive rises in mortgage rates and the strict fiscal measures taken in the Budget. Ironically the kind of flexible labour favoured by the Government could undermine its strict policy on inflation. It is more difficult for the Treasury to keep a handle on pay in a system where the old certainties of annual wage increases are supplanted by performance- related pay and remuneration dictated by labour's supply and demand.