–IDS: UK Jan-Mar Median Pay Deal 2.5%; Unchanged Vs Dec-Feb
–IDS: Median Early Apr Private Sector Pay Deals Rises To 3.0% Vs 2.5%

LONDON (MNI) – UK pay deals have risen in the first quarter of this
year from the fourth quarter of last, and early April figures suggest
they have risen higher still at the start of the second quarter,
according to Incomes Data Services.

The IDS report shows the median pay deal in the first quarter of the
year was 2.5%, unchanged from the three months through February. The
median private sector pay settlements for April is put by IDS at a
provisional 3%.

Headline CPI has been running at double, or more, the Bank of
England Monetary Policy Committee’s 2.0% target.

Ken Mulkearn, Editor of IDS Pay Report, told Market News that there
was “some evidence of inflation feeding through into pay.”

In the IDS series the median pay deal held pretty steady at, or
very close, to 2.0% through 2010, with early April data showing pay
deals running 1 percentage point above this.

The latest IDS figures, however, do not provide conclusive evidence
of a marked rise in median pay deals across the economy as a whole.

As IDS notes, April is the busiest month for public sector pay
deals, and many of these will be what the government and press have
termed “pay freezes”, which will counterbalance the apparent rise in
private sector pay growth.

Mulkearn said the latest IDS survey does not include these public
sector pay deals.

Earlier analysis of April pay deals by another specialist research
group. XpertHR, noted that the government in fact awarded an extra
stg250 per year for those on lower pay – below stg21,000 a year – under
its so-called pay freezes.

With many public sector workers benefiting from the additional
stg250 the public sector pay freezes recorded by XpertHR actually
represented a 1.8% pay increase, but this was still well below the 3.0%
rises IDS has registered in the private sector in April.

XpertHR’s April figures, which incorporated public sector pay,
showed the median pay deal actually dropping back in April to 2.0%.

IDS said offsetting the upward pressures on private sector pay
settlement levels were uncertainties over the economic outlook, weaker
consumer confidence and the potential impact of public sector job cuts.

Mulkearn said the upside and downside pressures on UK pay deals
were “finely balanced”.

A key issue for the Bank of England’s Monetary Policy Committee
members at present is how much weight to attach to the risk of elevated
inflation outturns driving up wage deals.

Martin Weale is one MPC member who has based his case for a hike in
Bank Rate on the risk of an inflation/pay spiral.

At a March Treasury Select Committee hearing Weale was asked about
the risk of high current outturns forming the basis for future pay
deals.

“I am more worried than some other members of the committee that
the sort of expectation and effect that you describe may get built into
the wage bargaining process,” Weale said.

When asked if he had any evidence of real wages increasing, Weale
conceded there was no strong evidence.

“There is survey evidence – admittedly it is not terribly good
evidence … – that does show some increase in (inflation) expectations,
and there is evidence that in the past that has fed through into unit
labour costs. At the moment the link seems to be rather weaker than it
has been in the past,” he said.

The IDS data, therefore, come at a sensitive time in the monetary
policy debate, with MPC members divided over the risk of pay deals
rising significantly and a lack of clear evidence that they will.

–London Bureau; Tel: 44-20-7862 7491 or email:
ukeditorial@marketnews.com.

[TOPICS: MT$$$$,MABDS$,M$$BE$]