Declining value of public sector pay - time to stop the rot‏

Median pay deals in the UK rose slightly from 2.0% to 2.2% in the three months through to November, according to the latest survey by Incomes Data Services (IDS).

This is the first rise in median pay settlements for sixth months although it remains less than half the rate of retail price inflation (RPI).

However in the public sector - where the Government has imposed a pay freeze - IDS expects pay rises to fall from a typical 0.75% increase in 2010 – a significant reduction in real value of earnings when RPI is expected to remain above 4% in 2011. http://www.bbc.co.uk/news/business-12124890

Economic analysis by blogger Duncan Weldon highlights that the share of UK GDP taken by wages over the next 5 years will drop from around 68% when the Coalition took office to about 64% by 2015:
http://duncanseconomicblog.wordpress.com/2010/12/15/the-coalition-favouring-capital-over-labour/

Public sector unions in particular must not passively acquiesce in this calculated attack on the living standards of working people but begin to drive a harder bargain in pay negotiations. It is not just a matter of self interest but for the common good. As Weldon points out consumption based on decent wages is essential to rebalancing domestic demand.

This analysis is borne out by a new global report by the International Labour Office (ILO) which provides evidence that failing to get more money into the hands of working people undermines economic recovery. The report shows that throughout 177 countries where data was collected, the growth in real average monthly wages declined from 2.8 percent before the crisis in 2007, to 1.5 percent and 1.6 percent, respectively, in 2008 and 2009. http://www.seiu.org/2010/12/global-report-power-of-unions.php

Incidentally, the ILO's report found that low pay is much less prevalent in countries with higher levels of union membership: ‘Wages are better aligned with productivity in countries where collective bargaining covers more than 30 per cent of employees, and minimum wages reduce inequality in the bottom half of the wage distribution’