Below-inflation pay awards become reality

Below-inflation pay awards are now a reality for workers in the private and public sectors, new research has found.

Figures from benchmarking data company Industrial Relations Services (IRS) have found that just 6.1% of pay awards are worth the same as or more than RPI inflation - the headline rate of inflation which measured 4.3% in May 2008.

The IRS headline measure of pay awards across the whole economy is 3.2% - 1.1% below the rate of inflation, resulting in major constraints on household budgets.

IRS pay and benefits editor Sheila Attwood said: "Inflation is being pushed upwards by rising fuel and utility bills. But employees are facing even more of a squeeze on their spending as inflation outruns pay rises."

At the same time, consumer prices inflation (CPI) - the government's preferred measure - surged to 3.3% in May.

The median basic pay increase in the public sector in the year to April 2008 is 2.5%, 1.8 % below RPI inflation. In the private sector, pay awards for the year to April 2008 are running at 3.5%, still 0.8% points lower than the increase in prices.

IRS research has shown that pay settlements have been below the rate of RPI inflation since May 2006, when both figures stood at 3%. The gap between inflation and pay settlements has hit a record 1.1% twice since then - in November 2007 and May 2008.