Rate of pay growth slows – ONS figures

Press Releases

14 Apr 2011

Pay rose just two per cent in the year to February 2011 a decrease of 0.3 per cent on the previous figure.

The findings from the Office of National Statistics (ONS) highlighted the average earnings growth, including bonuses, are becoming increasingly weaker.

When assessing average earnings in relation to regular pay, where bonuses are not included, the decrease is smaller at only 0.1 per cent, down to 2.2 per cent.

The figures become starker when looking at differences between the private and public sectors. Pay growth including bonuses in the private sector stood at 1.9 per cent compared to 2.3 per cent in the public sector. When bonuses are excluded the public sector still fares better, with average pay growth standing at 2.4 per cent compared to only 2.1 per cent in the private arena.

Peter Reilly, Director of HR Research & Consultancy at the Institute for Employment Studies, comments:

‘The worry about these figures is the impact on the economy if disposable incomes are increasing well below inflation and tax levels are rising. Squeezing profit margins will continue to make employers cautious on recruitment, with a consequential impact on the employment figures. Whilst there is no current sign of trade union or employee agitation, there must be a risk that we are brewing up for trouble later. When the economy improves will there be a backlash against these years of restraint, a desire to catch up these losses, imperilling any nascent economic recovery?

‘As to the sectoral split, it may be that incremental pay systems are providing some pay growth in public sector organisations, but even these are being challenged by some employers. If the Coalition’s hope of a revitalised private sector comes off and the public sector continues to cut costs, one would expect private sector wage growth to overtake public sector.’

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For further information or comment, contact Lorna Howes on 01273 763 414, or lorna.howes@employment-studies.co.uk