Still waiting for the wage-price spiral!
The latest figures from Income Data Services show that pay settlements between April and July represented a 3.5% rise in salaries. Hardly inflation busting.
The figures also show how diverse and responsive the UK’s pay bargaining process now is, with some sectors, such as chemicals and pharmaceuticals settling at around 4.5% while retail and the not-for-profit sectors are sticking at a belt-tightening 3%. As IDS point out, there are inflationary pressures on pay but these are being held at bay by the slowdown.
So while the Bank of England holds interest rates fearful of runaway inflation and ministers bang on about the need to avoid that wage-price spiral, in the real world pay is holding steady well below price rises. It’s probably now time to wake up and start stimulating the economy through interest rate cuts and other measures and stop panicking over home-grown inflation which still remains highly elusive.
Of course, we have to prevent inflationary expectations taking off as well. But the Government could do its bit here by not raising spectres of the 1970s spiral while using inflation as an excuse to hold down pay in the public sector.