From the TUC

What’s happening to pay?

04 Feb 2010, by in Labour market

Last year’s pay reality was never as simple as some newspaper stories suggested. This year union pay negotiators will face the possibility of the return of inflation and rising unemployment, and a conflict with the Government over public sector pay. The TUC and IDS are organising a conference on Pay Bargaining in 2010 on 16 Feb to help unions steer their way through these challenges.

Last year, the newspapers were full of stories about pay freezes and cuts; the employers’ organisations picked this up, of course, and tried to persuade us that this was happening to everyone. Or, that if you were a public sector worker, it should be. The reality has not been this simple.

Leading labour market analysts Incomes Data Services have pointed out that, for the economy as a whole, the 2009 median was a 2% increase. This isn’t massive, but it’s perfectly respectable at a time when unemployment has undermined workers’ bargaining power and inflation has been low (and sometimes negative). There have been sectors where pay has been very hard hit, manufacturing especially, but IDS’ authoritative pay survey has revealed that a number of companies that had introduced freezes returned to agreeing pay increases at the end of last year.

What will happen this year? Will inflation continue to rise? The return to 17.5% VAT makes this quite likely, at least in the short term, and fuel and transport costs continue to follow a long-term rising trend. If this keeps up workers will demand that their unions negotiate cost-of-living increases. Whoever wins the election there’s a very strong chance that the basic rate of income tax will go up, putting even more pressure on wallets and purses.

On the other hand, if the current improvement in the labour market fundamentals turns out to be a blip and unemployment starts rising again (which currently looks more likely than not) then unions’ ability to achieve those increases will be curtailed.

The other problem is going to be the likelihood of a government insisting on pay freezes and even cuts in the public sector. Of course, the logic for this is lacking – today’s IFS Green Budget confirms a point the TUC has made frequently, that “overall, pay levels in the public sector are probably not significantly out of line with those of similar workers in the private sector, once you take into account factors such as their age, education and qualifications”.

Their comment that public sector workers “have fared better than their private sector counterparts in the recession” is probably going to be picked up by the right wing media, but it’s worth remembering that, as Nicola has pointed out,  these things even out over time. If you average out pay increases since 1999, the average per annum increase has been 3.5% in the public sector and 3.97% in the private sector.

Nonetheless, public sector workers have been successfully demonised, and politicians may decide that cutting their pay is an easy way to tackle the deficit. Public sector unions face a conflict with the Government that could even threaten well-established national pay bargaining – that is one of the implications of the Green Budget and of More than we Bargained For, Alison Wolf’s recent report for the Liberal Democrat aligned Centre Forum.

How should pay bargainers deal with these challenges? One thing is certain – unions need access to the best possible information and advice about these issues, and all are going to be addressed at the annual TUC/Incomes Data Services conference on Pay Bargaining in 2010,  to be held at Congress House on 16 Feb. The conference will be chaired by Gail Cartmail of UNITE and the speakers will include TUC Deputy General Secretary Frances O’Grady, Alastair Hatchett of IDS, Heather Wakefield from UNISON, Geoff Lewtas PCS, Ken Mulkearn from IDS and Bernadette Fisher of UNITE. This is the third annual pay bargaining conference, and the previous two have been very well received – find out more details here.

One Response to What’s happening to pay?

  1. IFS have important data on public sector pay | ToUChstone blog: A public policy blog from the TUC
    Feb 9th 2010, 4:50 pm

    […] they do have an extremely useful round up of trends in public sector pay. Richard has already drawn attention to their […]