Summary of the editorial from IDS Pay Report 983, August 2007

Why does earnings growth appear subdued when basic pay is strong?

Average earnings growth across the economy rose by just 3.6 per cent in the year to May 2007, fuelling the proposition that there has been no ‘pay response’ to the higher inflation rate. Indeed, this level of earnings growth does seems rather subdued, particularly at a time when RPI inflation is running at over 4 per cent. In addition, our most recent figures on basic pay rises show the median settlement level for the whole economy at 3.5 per cent – having risen sharply from 3 per cent at the start of the year as inflation rose – and a growing number of private sector pay deals at 4 per cent. In these circumstances, we might expect earnings growth to be above the level of basic wage rises. So what is happening?

In this article we look at the average earnings figures by industrial sector. These figures are not seasonally adjusted and include bonuses. This approach allows us to use our knowledge of pay developments in different sectors to look behind the headline figures, highlighting anomalies and trying to explain specific movements.

... the full editorial can be read in IDS Pay Report 983