The Sterling Crisis: Salary increases outstrip inflation: Pay rises

PAY RISES are consistently topping the rate of inflation and are likely to follow any change in the retail price index, according to a study of expected wage patterns over the next 12 months, published yesterday.

The level of salary increases dropped by more than half since the beginning of 1991 as inflation fell rapidly to about 4 per cent. The current retail price index (RPI) of 3.6 per cent is matched by average wage rises of between

4 and 5 per cent.

Any increase in the cost of living will almost certainly be shadowed by a similar rise in earnings, Incomes Data Services, a pay specialist company, says.

'We do not share the current CBI (Confederation of British Industry) view that there has been a significant change in pay bargaining behaviour.

'The CBI believes the link between pay increases and inflation has been broken. Indeed, if anything, the link has been stronger over the past year as the lower inflation rate has helped to reduce expectations,' it says.

Several companies, including British Airways, Kelloggs and Ford, have pay rises linked to inflation, while the 'going rate' in recent months has been in line with the RPI at about 4 per cent.

Although the average pay rise across the economy has been stable and slightly above inflation, there has been considerable variation between industrial sectors.

Engineering, printing, consumer electronics and road haulage have all been badly hit by the recession and have seen lower pay rises and the imposition of wage freezes. Settlements in chemicals and in food, drinks and tobacco have averaged above 4 per cent with freezes extremely rare. Deals in finance and retailing have spanned all levels of increase.

Although wage freezes have been used, Incomes Data Services predicts less use of the mechanism in 1993, particularly if inflation remains at a low level.

'Several times over the past year we thought that the incidence of pay freezes might be declining, but each time this has not been so, because industrial confidence has been on a roller-coaster, with several false dawns for economic recovery. Very low inflation in 1993 may mean fewer firms are forced into freezes - 2.5 per cent may be affordable, where 5 per cent might not.'

Predicted influences on wage and salary bargaining over the next 12 months include poor labour mobility because of the stagnant housing market, a rise in profit-related pay with the promise of extra money in better times, and the continued extension of merit or performance-related pay.

The Government is expected to find it difficult to restrain the public sector salary bill with so many groups tied to pay review bodies.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Account Manager

£20000 - £35000 per annum: Recruitment Genius: This full service social media ...

Recruitment Genius: Data Analyst - Online Marketing

£24000 - £35000 per annum: Recruitment Genius: We are 'Changemakers in retail'...

Austen Lloyd: Senior Residential Conveyancer

Very Competitive: Austen Lloyd: Senior Conveyancer - South West We are see...

Austen Lloyd: Residential / Commercial Property Solicitor

Excellent Salary: Austen Lloyd: DORSET MARKET TOWN - SENIOR PROPERTY SOLICITOR...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there