Bargaining Prospects 2007 - Briefing 155

April 2007

This briefing aims to provide a range of UK and Scottish data (where This briefing aims to provide a range of UK and Scottish data (where available) to aid pay negotiations. In this briefing, you will find the latest information on the following topics:

1. Labour Market Changes
2. Average Earnings
3. The Gender Pay Gap
4. Inflation
5. Employers Agenda
6. Other Issues

1. Labour Market Changes

UK

The figures for April 2007 show a decrease in both the number of people in employment and the employment rate. The number of people and the unemployment rate have increased, but the claimant count has fallen. The unemployment rate was 5.5% in the three months to February 2007, up 0.1% from the three months to November 2006 and up 0.3% points from a year earlier.

The unemployment level was 1.69 million in the three months to February to 2007, up 21,000 from the three months to November 2006 and up 120,000 from a year earlier.

The claimant count level in March 2007 was 910,800, down 9,200 on the month and down 28,000 on a year earlier. The claimant count rate in March 2007 was 2.9 per cent, unchanged from the previous month and down 0.1 percentage point from a year earlier.

Scotland

Labour Force Survey data for Scotland indicates that the trend in the employment rate is increasing, but the rate in the latest period is not significantly different from a year ago. The trend in the unemployment rate is close to flat, and the rate in the latest period is not significantly different from a year ago.

Data for the three months to February 2007 show the seasonally adjusted employment rate at 76.3 %, up 1% on a year earlier. The seasonally adjusted unemployment rate in Scotland was 5.2%, down 0.2% on a year earlier.

Fig 1. UK and Scotland ILO unemployment figures Jun'06 – Feb '07

Source: ONS

The seasonally adjusted claimant count rate in March 2007 was 3.0%, unchanged from February 2007, and down 0.3 percentage points since March 2006. The seasonally adjusted number of claimants in March 2007 was 80,700, down 1,200 on February 2007, and down 7,200 since March 2006.

Fig 2. UK and Scotland Claimant unemployment figures Jan 2007 – Mar 2007

Source: ONS

Local Area data

The claimant count as a proportion of the resident working age population was lowest in Aberdeenshire, at 0.9%. It was highest in North Ayrshire, at 4.6%.

Fig 3. Scottish Local Area Claimant Count (Mar 2007)

Source: ONS

2. Average Earnings

In the three months to February 2007, whole economy average earnings, excluding bonuses, increased by 3.6%, unchanged from the previous month. Including bonuses, the increase was 4.6%, up 0.4 percentage points from the previous month. The corresponding figures for the main industry sectors were:

Manufacturing

3.7% excluding bonuses, down 0.3 percentage points;

3.4% including bonuses, down 0.6 percentage points.

Service industries

3.7% excluding bonuses, up 0.1 percentage point;

5.0% including bonuses, up 0.5 percentage points.

Public sector

3.1% excluding bonuses, unchanged;

3.2% including bonuses, unchanged.

Private sector

3.7% excluding bonuses, unchanged;

4.9% including bonuses, up 0.4 percentage points.

Median gross weekly earnings

Employees on adult rates (full time), whose pay was unaffected by absence

Earnings forecast
IRS Pay Intelligence reported in April 2007 that "the consensus of our panel is that this strong earnings growth will be sustained. With the exception of a rise to 4.5% in the second quarter, average earnings growth will hold steady at 4.4% throughout 2007."

Forecasts of annual percentage rate of change in earnings (whole economy), 2007

Source: IRS Pay Intelligence, April 2007

Average hours worked (weekly)

National Statistics reports that total actual hours worked per week were 928.0 million in the three months to February 2007.

Average weekly hours worked in the three months to February 2007 were 37.2 for all full-time workers.

Broken down by gender, the average weekly hours worked by men in full-time employment over this period ran at 39.0 hours, compared to 34.1 hours for women. The corresponding hours for part-time workers ran at 15.7 hours for men and 15.8 for women.

3. The gender pay gap

The stronger growth in full-time women's hourly earnings excluding overtime compared with men's has meant that the gender pay gap has reduced to 12.6%, down from 13.0% in 2005.

The gap showed little change when measured using the mean full-time hourly earnings excluding overtime, from 17.1% in 2005 to 17.2% in 2006. This was due to a higher growth in the earnings of full-time men in the top decile.

Meanwhile, the government has responded to the Women and Work Commission's recommendations with a number of announcements. Trade union equality reps will be resourced via the Government's Union Modernisation Fund, with a funded post based at the TUC. The Government is embarking on an 'exemplar employer initiative', working with employers to develop programmes in areas such as flexible working, job sharing, and helping women returners back into the workforce. The Government has also committed itself to introducing a new 'Equality Check' tool that will help companies spot any emerging problems around unequal treatment of employees such as the extent of the gender pay gap in their organisations.

In the public sector, the new duty to promote gender equality will come into effect in June 2007. More advice on equal pay issues is available from the Unison Scotland website (www.unison-scotland.org.uk).

4. Inflation

CPI annual inflation – the Government's target measure – was 3.1% in March, up from 2.8% in February. RPI inflation rose to 4.8% in March, from 4.6% in February and was influenced by many similar factors to those that affected the CPI. Housing costs that are excluded from CPI had a small upward contribution to the change in the RPI annual rate, mainly due to depreciation costs, which rose this year but fell a year ago, reflecting movements in the smoothed house price index used to calculate this component.

RPIX inflation – the all items RPI excluding mortgage interest payments – was 3.9 per cent in March, up from 3.7% in February.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate is above average for the European Union as a whole. The provisional inflation rate for the EU 27 in March was 2.2%, compared with the UK rate of 3.1% for the corresponding period.

Source: ONS (http://www.statistics.gov.uk/pdfdir/cpi0407.pdf)

Inflation forecasts

IRS Pay Intelligence reported in April 2007 that its panel of experts sees headline inflation averaging 4% in the second quarter of 2007, down 0.4 percentage points on the first quarter. It is then expected to fall further over the remainder of 2007, to average 3.7% over the year.

Inflation forecasts (annual % change, all items RPI), 2007

5. Employers Agenda

Pay Settlements 2007

According to IDS the main range for private sector pay deals in 2007 is likely to be between 3 and 4.5%, with the range widening if inflation continues to rise and the economy remains strong. January's inflation rate (2.7% CPI / 4.2% RPI) will influence the level of settlements reached in April 2007.

Government Policy on Pay

Public sector pay settlements are likely to be lower, under the impact of a much tighter government pay policy, which is seeking to increases consistent with its inflation target of 2%. This stringent policy was accompanied by a more interventionist approach by the government to the various review bodies this year and resulted in increases centred on 2.5%. The latest Scottish Executive pay guidance is awaited. This is likely to reflect Treasury guidelines and may reflect other bargaining priorities in terms of the length of settlements, job evaluation and performance related pay.

Long-Term Pay Deals

Long-term deals have grown in popularity over recent years. Employers are attracted to the stability they can provide and the assistance in handling immediate and longer-term negotiating issues. Many of the deals with links to the RPI inflation rate are set to pay increases of 4% or above, however those with pre-set increases are likely to be lower, centred on 3.3%.

Migrants and the Labour Market

There has been a debate recently as to whether migrant workers have been responsible for reducing pressure no wage levels that might have been expected to be greaer in the context of rising employment levels. The answer is not straightforward, since it partly depends on a difficult assessment of whether wage levels would have been any higher if migrants were not part of the picture. On the one hand, many of the migrant workers from the eight EU accessioin countries are working in low-paid jobs that UK-based workers on the whole do not want, for example in agriculture and food processing. On the other hand, there are also concentrations in construction, transport and other service industries. While there have been one or two examples of agency staff replacing longer-serving workers, overall there is little evidence that migrant workers have 'displaced' UK-based workers. Nevertheless, exploitation of migrant workers is still a key issue resulting in trade unions campaigning to recruit migrant workers.

6. Other Issues

Family Friendly Policies

The government is extending maternity and adoption pay from six to nine months from April 2007, with the aim of extending it to one year by 2008. The same regulations also remove the length of service requirement for additional maternity leave, and will see the introduction of 'keeping in touch' days, whereby an employee on maternity leave can choose to work for up to 10 days during the statutory maternity leave period, without penalty. There will be a new right for fathers to take additional paternity leave and pay, and the right to request flexible working is being extended to carers of adults.

Holiday Entitlement

The government has proposed that the minimum holiday entitlement will rise in stages, starting from 1 October 2007, with the aim of prohibiting employers from including the eight bank and public holidays as part of the leave entitlement. In the first stage, from 1^st October 2007, the statutory entitlement will increase from 4 to 4.8 weeks. The next stage, introducing the full 28 days, or 5.6 weeks, will be decided upon after the initial consultation period, which closed on 22^nd September 2006. However, it is expected to take place by October 2008 or 2009 at the latest. By the end of the process all workers will receive at least four weeks' paid holiday plus the additional eight bank and public holidays as paid leave each year.

FURTHER INFORMATION:

UK Official National Statistics

http://www.statistics.gov.uk

Scottish Official Statistics

http://www.scotland.gov.uk/stats/scotstats.asp

Scottish Executive Statistics

http://www.scotland.gov.uk/Topics/?pageID=62

UNISON Internet

http://www.unison.org.uk

UNISON Scotland

http://www.unison-scotland.org.uk/