Pay rises fall below inflation rate

Coins and notesPay rises are still not keeping up with the rate of inflation, with basic rises around 2.5% in recent months, according to a new study.

But the number of wage freezes has fallen to around one in 12 settlements, while increases in private firms are set to be around 2.75%, compared to the current RPI inflation rate of 3.3%, said Incomes Data Services (IDS).

Wage increases in the public sector are expected to be 1%, in line with the Government's pay policy.

Ken Mulkearn of IDS said: "The fact that wage rises continue to lag behind inflation could well be a factor in the conundrum witnessed recently, whereby employment levels have been better than expected but GDP growth remains low.

"From this point of view, signs that private sector awards might be running at slightly higher levels are probably welcome. But while inflation presents an upward pressure on pay, the labour market remains fragile.

"Much depends, therefore, on companies' decisions in respect of their own costs and the spending power of their employees."

The study of over 100 recent settlements showed lower deals in construction and food and drink manufacturing firms and higher payments in the energy sector.
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