Earnings growth – private sector workers outpace the public sector

Incomes Data Services (IDS) are reporting….

“Average earnings growth was 6.8% in the private sector in the year to August, contrasting with a growth rate of 2.2% in the public sector (excluding financial services)…”

One would think this is encouraging news (at least for private sector workers) if it weren’t for the fact that CPI/RPI/CPIH were at 9.9%/12.3%/8.6% respectively.

It’s worth remembering that the pay rises that came into effect in April 2022 were negotiated in the autumn of 2021 when expectations about inflation were almost comically optimistic. At the time, the forecasts were saying that the leap to 3.2% was an outlier that made things look worse than they were. By the time April came around, the figures were hugely higher (9.1% CPI and 11.1% RPI).

So if you imagine a graph plotting inflation, and one plotting earnings, even those who were lucky enough to negotiate an inflationary increase in the Autumn of 2021 will have found that they were actually working for significantly below-inflation pay rises in April 2022.

If anyone is fortunate enough to be able to negotiate very strongly for cost-of-living increases under these circumstances will not only need a pay rise of about 16% in April 2023 – they’ll also need an unconsolidated (i.e. temporary) pay rise of around 10% to cover all of the money that they have lost trying to keep pace with inflation.