Unite the Union January 2015

Transcription

1 Unite bargaining brief Unite the Union January 2015 INTRODUCTION Much recent media coverage has been given to figures showing that earnings are no longer falling in real terms. Whilst this is welcome, we must not forget that this is largely due to low inflation levels and that wage increases are still low with earnings not expected to reach pre-crisis levels until after the 2020 election 1. In addition, continued higher than inflation increases are by no means a certainty 2. IDS reports the median settlement as unchanged at 2% in the three months to November 2014 with a median of 2.2% in the private sector, 1% in the public sector and 1.9% at not-for-profit organisations. The New Year saw the debate over the merits of RPI and CPI inflation measures revisited. As a result, and for ease of reference, we have reproduced towards the end of this Bargaining Brief the report from December s issue on a former Cabinet Office economist s finding that RPI is a more suitable measure for uprating pay. John Earls, Editor PAY SETTLEMENTS MEDIAN SETTLEMENT HOLDS STEADY IN NOVEMBER IDS Pay reports that pay awards remain stubbornly low in the three months to November, as the higher level of minimum wage uplift in 2014 fails to translate into higher headline awards for many employees. Instead, settlements are following a similar course to 2013, when settlement levels dropped in the latter part of the year. Pay Settlement Data - three months to end of Nov 2014 Whole economy Median 2.0% Average 2.1% Weighted average (by employee nos) 1.9% Inter-quartile range 2.0 to 2.7% Median by sector Private sector 2.2% Manufacturing & production 2.0% Private services 2.3% Public sector 1.0% Not-for-profit 1.9% Based on 42 settlements covering 759,920 employees Source: IDSPay.co.uk The median pay settlement across the economy remained unchanged at 2% in the three months to November 2014, according to the latest figures from IDS Pay. This is in line with the median for the three months to October, but lower than the figures recorded throughout the rest of (JN????) HB260115

2 NO UPWARD PRESSURE FROM NMW INCREASE As was identified by IDS Pay in last month s settlement analysis, the higher increase in the National Minimum Wage (NMW) has not had the anticipated effect of pushing pay awards to a higher level. The NMW rose by 3% in 2014, as opposed to 1.9% in 2013, but the median award as recorded in IDS Pay has followed a similar trajectory in both years, falling to 2% in the second half of the year. IDS find that: This is in part because although many employers increased pay by 3% at the bottom of their payscales to comply with the minimum wage uplift, a significant proportion chose not to extend this award throughout their pay structure to maintain differentials. Instead, they chose to pay a headline increase at a lower level, and to make higher awards to the lowest-paid employees as an underpinning measure to comply with NMW legislation. Examples in the latest settlement analysis include retail staff at both Mothercare and the Early Learning Centre, where headline increases of 2% were supplemented by 3% uplifts to those aged over 18 and on the National Minimum Wage. Some retailers did, however, pay 3% to all staff, in some cases though not all, because large numbers of their staff are on the statutory minimum. Examples of companies paying 3% as their overall headline award include Argos, Halfords, KFC and Costa Coffee. PRIVATE SECTOR MEDIAN FALLS SLIGHTLY IDS figures show that the median pay award across the private sector fell to 2.2% in the three months to November 2014, down from 2.3% in the three months to October. This fall was mainly a result of the median in manufacturing and production falling from 2.2% to 2.0%, since the median award in private services remained steady at 2.3%. The median award in the public services remained at 1%, and the median at not-for-profit organisations fell slightly to 1.9%. The distribution of settlements has remained largely steady, with just over half of all awards recorded between 2 and 2.99%. Just under a quarter of employers paid increases of 3% and above, with most of these at exactly 3%. Just under a fifth of employers made awards below 2%, predominantly in the public or not-for-profit sectors, and pay freezes remain very rare. (Source: IDS Pay) DECEMBER INFLATION FIGURES RETAIL PRICE INDEX (RPI) 1.6% (down from 2.0% in November) CONSUMER PRICE INDEX (CPI) 0.5% (down from 1.0% in November) BREAKDOWN OF KEY RPI STATISTICS ANNUAL RATE Household expenditure 2.5% Tobacco 7.7% Gas 3.1% Electricity 2.0% Housing 3.5% Water and other charges 2.4% Clothing & footwear 6.4% Personal expenditure 4.0% Rail fares 3.9% Source: 2

3 The rate of inflation fell sharply to 1.6% in the year to December 2014, as measured by the Retail Prices Index (RPI). This represents a fall of 0.4 percentage points from the inflation figure of 2% recorded in the year to November. This drop in inflation was primarily driven by a fall in wholesale fuel prices, with corresponding effects on retail prices. The largest downward contribution to the rate of inflation was from fuel and light, with prices for electricity and gas remaining unchanged in 2014 compared to significant rises in The second-largest downward effect on the RPI came from motoring expenditure, where petrol and diesel prices fell in 2014 following a rise in The price of petrol as recorded in the RPI was 119.8p per litre in December 2014, 8.4% cheaper than December The price of diesel stood at 124.8p per litre in December 2014, 10% down on the previous year. The size of these combined effects means that the speed at which the cost-of-living had been increasing has slowed, despite small offsetting rises in areas such as fares and other travel costs. The Consumer Prices Index (CPI) measure of inflation, the Government s preferred measure for many macroeconomic purposes, also fell as a result of similar pressures from wholesale fuel prices. CPI inflation fell from 1% in the year to November 2014 to just 0.5% in December 2014, its lowest rate since May (source: IDS Pay) Economists revise down RPI forecasts as prospects for rate rise recede IDS Pay report that City economists have revised down their forecasts for the RPI as a result of lower than expected inflation in recent months. There is also increased uncertainty on the timing of the Bank of England s first interest rate rise, with many forecasters pushing back their previous projections. Inflation is, therefore, likely to be lower than previously thought over the next 18 months. However, a consensus is emerging that earnings growth will finally begin to recover in The latest inflation forecasts from IDS sample of City economists have seen major downward revisions from the last quarterly round-up. Inflation has been far lower in recent months than previously projected, with November s RPI and CPI both 0.6 percentage points lower than last quarter s forecasts predicted. Lower inflation has led the forecasters to push back their projections for the timing of any rise in interest rates which, in turn, has fed through to lower projections for the RPI over Looking ahead over the next 18 months, projections for RPI inflation have been revised down, on average, by 0.7 percentage points from the previous set of City forecasts. According to the majority of economists in IDS sample, the RPI is now set to fall below 2% in December, only climbing above that level in spring The majority see the RPI reaching 3% by the end of 2015, and continuing to rise steadily into According to IDS Pay: Both domestic and international economic trends have ensured a lower starting point for the latest inflation forecasts than previously projected. Internationally, falling oil prices, as a result of lower global demand and increased supply, have had significant disinflationary effects on petrol prices in the UK. In addition, growth in the strength of sterling has led to lower import costs which have also acted as a drag on inflation. Domestically, inflation has been further subdued by competition over prices between supermarkets and lower unit labour costs across the economy. 3

4 All-items retail price inflation forecasts, 15 December 2014 December January 2015 February March April May June July August September October November CE CG DB GS MS NO RBS SG ROUNDED %INC %INC %INC %INC %INC %INC %INC %INC AVERAGE %INC December January February March April Forecasters: CB Commerzbank; CE Capital Economics; CG Citigroup; CS Credit Suisse; LB Lloyds Bank; MS Morgan Stanley; NO Nomura; RBS Royal Bank of Scotland; SB Scotia Bank; SG Société Générale. Source: IDS Pay LRD PAY & CONDITIONS DATABASE ONLINE SUMMARY OF PAY ROUND RECENT UNITE SETTLEMENTS AS REPORTED TO THE PAY & CONDITIONS DATABASE ONLINE Settlement Date Agreement Standard Incresse 01/01/15 GKN Driveline Birmingham 3.50% 01/01/15 Rolls Royce Motor Cars 3.50% 05/01/15 Engineering Construction (NAECI) NJC 3.20% 01/01/15 Network Rail (Signallers, Operational and Clerical Grades) 3.10% 01/01/15 Rolls Royce Submarines - Raynesway Main Site (Derby) 3.00% 01/01/15 HJ Heinz 2.75% 01/01/15 Rudolph & Hellmann Automotive 2.75% 01/01/15 Ball Packaging 2.70% 05/01/15 Refractory Users Federation 2.70% 01/01/15 Urenco 2.60% 05/01/15 Abellio Byfleet Surrey 2.50% 01/01/15 Kelloggs (Wrexham) manual 2.50% 01/01/15 Mettis Aerospace 2.50% 01/01/15 Varian Medical Systems 2.50% 04/01/15 First South Yorkshire 2.46% 01/01/15 DHL Supply Chain (Marks & Spencer) Warehouse Ops 2.40% 01/01/15 Arriva Yorkshire 2.00% 01/01/15 Caterpillar Building Construction Products (BCP) 2.00% 01/01/15 DHL Supply Chain (Marks & Spencer) UK Drivers 2.00% 05/01/15 Electrical Contracting (Scotland) JIB 2.00% 05/01/15 Electrical Contracting JIB 2.00% 01/01/15 Prysmian Cables (Eastleigh) 2.00% 01/01/15 Prysmian Cables (Wrexham) 2.00% 01/01/15 Thermal Insulation Contractors Association (TICA) 2.00% 4

5 EARNINGS AND PAY The table below is based on the mean average earnings figures published in the Annual Survey of Hours and Earnings (ASHE) The original figures have been uprated by the 0.2% increase in average weekly earnings for the whole economy between April and October to give an estimate of earnings now. Full-time average weekly earnings by occupation Source: december-2014/index.html a week All employees All male All female Managers Professionals Associate professionals Admin & secretarial Skilled/craft Services Sales Operatives Other manual jobs Percentage Annual Rise in Average Weekly Earnings (Total Pay) November 2014 Whole Economy 1.7% Private Sector 2.1% Public Sector 0.7% Public Sector excluding Financial Services 1.2% Manufacturing 1.7% Services 1.7% Construction 2.3% Wholesale, Retailing, Hotels & Restaurants 1.3% Total average weekly earnings rose by 1.7% in the three months to November 2014 compared with the same period a year earlier, according to figures from the Office for National Statistics (ONS). Excluding bonuses, earnings for the whole economy grew by 1.8%. This is the highest increase in regular earnings since mid-2012, although it is still well below pre-recessionary levels. Pay growth on both measures has now risen for five consecutive months, with total pay increasing by 0.3 percentage points on the equivalent figures for October. However, a lower single-month growth figure in November of 1.8% suggests that the current trend of rising earnings growth is not yet firmly entrenched. Earnings growth at the whole economy level remains behind increases in prices, as measured by the retail prices index (RPI) in November. Compared to a year earlier, total earnings growth in the three-month period to November 2014, was 0.3 percentage points lower than the 2% rate of inflation, as measured by the RPI over the same period. It is, however, the second consecutive month that both measures of earnings growth have been above the Government s preferred measure of inflation, the CPI (which stood at 1.3% in October and 1% in November). If oil prices continue to fall, we may expect next month s figures to show earnings growth also pulling ahead of RPI. (Source: IDS Pay) PRIVATE SECTOR PAY GROWTH IDS analysis of the earnings figures reports that rising earnings growth at the whole-economy level is being driven predominantly by the private sector, where total pay growth stood at 2.1%, some 0.4 percentage points higher than the previous three-monthly figure. Growth in regular pay, which excludes bonuses, rose by 0.2 percentage points, to stand at 2.2%. The last time that regular pay growth in the private sector was higher was over five years ago, when it stood at 2.5% in the three months to March The fact that regular pay growth in the private sector is stronger than total pay growth suggests that the widespread postponement of bonus payments in 2014, in order to allow high-earning employees to benefit from the fall in the higher tax rate, is still having an influence on the earnings figures. The strongest growth in both total and regular pay occurred in finance and business services, standing at 2.6% and 2.8% respectively. Both measures saw a significant increase on the previous month s figures, with growth in total pay rising by 0.6 percentage points and regular pay rising by 0.5 percentage points. Single-month growth figures in finance are also the highest of any sector, at 2.7% in November for both total and regular pay. Total pay growth is also relatively strong in construction (2.3%), services, and manufacturing (both 1.7%), although all these sectors experienced a fall on the previous month. Within the private sector the biggest increase in total pay growth, on both the single-month and three-month measures, has been in wholesale and retail. Total pay in this sub-sector increased by 0.9 percentage points on the previous month s figure to 1.3%. This is the only area of the private sector in which the single-month figures increased this time, suggesting that the higher uplift in the minimum wage in October 2014 has had some influence. Unlike many other areas of the economy, pay reviews in this sector tend to take place later in the year to coincide with the annual increase in the statutory floor. Earnings growth in the public sector continues to be restrained by government pay policy, with both total and regular earnings growing by just 1.2%. Public sector growth in regular earnings fell on the previous month s average, by 0.1 percentage points. (Source: IDS Pay) 5

6 Pay awards end 2014 at 2% and New Year settlements fail to make an impact (XpertHR) Pay awards in 2014 ended the year below where they started, with the median basic pay rise for UK employees standing at 2% in the three months to the end of December This compares with a 2.4% award recorded in the first quarter of last year. The latest figures from pay analysts at XpertHR continue to reflect the subdued nature of pay bargaining within businesses in the UK. Other key findings from XpertHR's latest quarterly analysis of pay awards include: The middle half of pay awards effective in the three months to 31 December 2014 are worth between 1.6% and 3%. The most common pay award was a 2% increase. Within the private sector, manufacturing-and-production companies continue to offer higher pay rises - at a median 2.8% - than those operating in private-sector services, where pay awards are typically worth 2%. Pay freezes account for just 6% of all pay awards. Pay awards in the public sector were worth a median 1.5% in the 12 months to the end of December 2014, compared with 2% in the private sector over the same period. Pay award levels have also fallen below the level of both retail prices index (RPI) and consumer prices index (CPI) inflation, which stood at 1.6% and 0.5% respectively in December While this provides some welcome news for employees, the level of pay awards remains low and shows little sign of upward movement. Private-sector employers surveyed by XpertHR have predicted a 2% median pay award over the year to August Pay awards during the final four months of 2014 have been at 2%, and the first 2015 deals to conclude are not showing any signs of significant movement away from this level. XpertHR has collected details of 50 pay awards effective in January Among these, the median pay award is 2.1%, just 0.1 percentage point higher than the going rate for the end of (Source: XpertHR) Report suggests RPI is more suitable than CPI for uprating pay A report by a former Cabinet Office economist has assessed the accuracy of the two main inflation measures, the CPI and the RPI, in reflecting changes to the purchasing power of pay and pensions. The report, by Dr Mark Courtney, former Deputy Director and Head of Economics in the Regulatory Impact Unit of the Cabinet Office, found that Overall...the RPI is as good a consumer price index as one can get for uprating purposes. His finding is due to systemic differences between the CPI and the RPI which, according to the report, are entirely the result of under-estimation of price inflation by the CPI. This under-estimate has been running at 0.9% since January 2014, with the latest figures for each measure (in the year to October 2014) showing inflation at 2.3% (RPI) and 1.3% (CPI). Gap between RPI and CPI The gap between the two measures arises as a result of a number of factors. The first is the different coverage of the two indices. The RPI is targeted on the working population, since it excludes pensioners, tourists and the wealthiest 4% of the population. The CPI, by contrast, includes spending by pensioners, foreign residents and the highest earners. The RPI also includes owner-occupier housing costs, which form a major element of most household expenditure. The CPI does not include these costs. The differences in coverage mean that the CPI has been lower than the RPI for 0.3 percentage points a year since the former was introduced in the UK. Further to this, the RPI and CPI involve different statistical methods for calculating average price changes for the items covered by each measure. The RPI uses an arithmetic average, while the CPI uses a geometric average. The type of arithmetic mean used by the RPI is regarded by statisticians as an unbiased in the statistical sense estimator of the average rate of inflation. However the geometric mean used by the CPI tends to be biased downwards. The resulting difference between the two measures, known as the formula effect, averages 0.6 percentage points. According to the report, this under-estimate resulting from the use of the geometric mean has been defended in the past on the basis that it allows for changes in consumer purchasing behaviour, towards goods or services whose prices have risen more slowly. But the report argues that this neglects the fact that price changes are also driven by changes in demand for goods or services, and not just supply alone. Therefore allowing for consumer substitution does not mean that one formula should be used in preference to another. 6

7 Status of RPI The CPI is currently the Government s preferred measure of inflation, and while the Office for National Statistics (ONS) continues to publish the RPI, it no longer has national statistic status. This decision was reached partly on the basis that the methods used to produce the RPI are not consistent with internationally recognised best practice. The RPI uses two types of the arithmetic mean, depending on whether or not the item whose inflation rate is being calculated is homogenous, and therefore competes with other items on price or availability. It uses the ratio of averages (sometimes called the Dutot formula) when the items are homogenous and the average of relatives (known as the Carli formula) when they are not. While the Dutot formula is commonly used by other countries in assessing inflation, the Carli is not. The ONS found that the use of the Carli formula in the RPI is the primary source of the formula effect difference between the RPI and the CPI, and that this formulation does not meet current international standards. Dr Courtney s report argues that the rarity of the Carli formula elsewhere is because many countries, particularly in Europe and Asia, use tightly-defined, homogenous items to measure price inflation, unlike the UK. Source: IDS 2014 PAY SURVEY AVAILABLE FROM THE LABOUR RESEARCH DEPARTMENT LRD s annual Pay Survey is now available to read at: The LRD 2014 Pay Survey was published in November The first part of the Survey contains details of more than 700 pay settlements from August 2013 till the end of July All members and officials of UNITE have access to the Payline database - username: unite password: opal961 When you log into Payline you will be able to access the enhanced version of the Pay Survey with links to the Payline records. Contact Details Bargaining Brief Compiler: Steve Martin steve.martin@unitetheunion.org COMPANY ACCOUNTS All requests for information relating to company accounts are to be directed to: john.neal@unitetheunion.org Editor: John Earls john.earls@unitetheunion.org ACCESSING DATA The data contained in this brief can all be obtained by using online facilities available to Unite members and general websites. Unite has provided a workplace representative s guide to the web and this is available at In addition all Unite members can access the pay and conditions database maintained by LRD at or through the LRD website username: unite and password: opal (JN????) HB260115