Public Sector and Private Sector Pay Gap

Pay settlements in the private sector are holding up at relatively high levels, according to the latest figures from the IDS Pay Databank. The data shows that the median pay rise in the private sector – including manufacturing and private services – was 3.8% in the three months to the end of May. This is the same level as the median rise for the whole economy in our previous analysis, of pay increases in the three months to the end of April, which is itself higher than the trend figure for the previous 18 months of 3½ per cent.

However the median for all pay settlements, across the economy as a whole, has been revised down to 3.5% for the three months to the end of May. This is mainly the result of a range of lower increases being awarded in the public sector, under the influence of the Government’s pay policy, which is aimed at restricting the level of increases being offered to employees in the civil service, local government, and the NHS. The latest figures include the 2.75% award for the 1.2 million staff covered by the NHS Pay Review Body, which will be paid this month and backdated to 1 April.

The whole-economy median masks contrasting outcomes for employees in the public sector on the one hand, and key parts of the private sector on the other. If we compare private sector settlement levels with those in the public sector, there is a gap of a little over 1% on average, with the median public sector settlement for the three months to May at 2.7%. This is due mainly to the Government’s determination to keep its spending under control.

The latest figures are based on 168 pay awards effective in the three months to the end of May, covering 2,548,380 employees in total. Of these, over two-fifths (41%) are at or above 4%. As before, deals in manufacturing – including settlements at firms in the chemicals, engineering and food and drink manufacturing sectors – continue to keep private sector settlements at relatively high levels on average. Of the 146 deals recorded at private firms for the latest analysis, a third are awards in these sectors that have produced pay rises at or above 4%. By contrast, of the 31 awards worth less than 3%, half are in the public sector.

Commenting on the latest figures, Phil Chandler said:
“Private sector wage deals continue to present a relatively strong picture and settlement levels there have maintained their lead on those in the public sector. Inflation – driven by external factors like food and fuel prices, labour market factors, and affordability, as well as the extent of collective bargaining at private firms, are all parts of the picture here.”