Private sector pay catches up with inflation

Stat of the day: 3%. It seems that the pressure on incomes could be easing, with the median pay award - the midpoint of all pay settlements for the private sector - sitting pretty at 3% as inflation continues to fall.

by Rebecca Burn-Callander
Last Updated: 09 Oct 2013

Some 46% of all pay rises in the three months to May 2012 were at the 3% level or above. And while this a slight drop on the quarter to April 2012, when 48% of deals were at 3% or over, the fact that inflation has fallen to 3.1% on the RPI (the measure most commonly used to set pay rates), means that the squeeze on real pay has lifted.

This is great news for cash-strapped consumers, who have been struggling to make ends meet. But only really affects those who work in the private sector. In the public sector, it's a different story. Pay freezes in the public and voluntary sector stand at 20%, keeping the median pay award value at 1.5% for another month.

Drilling down deeper into the data, compiled by, a Thomson Reuters company, all industries in the private sector are not equal. Pay awards in manufacturing are higher than in private sector services, with the median pay award for the former standing at 3% in the three months to May, the same as last month, while the median settlement for private sector services is 0.4% lower at 2.6%. Nevertheless, pay in the services sector is on the increase - albeit slowly - increasing by 0.1% over the month.

Ken Mulkearn, editor of IDS Pay Report, believes that this could be a positive trend across the upcoming months.'If private sector pay settlements remain at current levels and inflation falls further, then the squeeze on workers' incomes which began in 2008 will have been loosened significantly,' he says.

MT reckons that this balance on real pay and inflation should make you feel approximately £10 richer every month. Don't spend it all at once, will you?

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