Myth of a private-sector pay freeze

There is an urban myth that all pay in the private sector is frozen, and so public-sector pay should be frozen too. In fact, pay awards have continued in the private sector this year - about two-thirds have awarded increases, from 1% to 4% or more. A Guardian article (Chancellor signals pay squeeze for public sector, 6 July) uses misleading earnings figures which seemingly give credence to the urban myth. They write: "Average earnings in the public sector for the three months to March 2009 (including bonuses) stood at +3.6% in the public sector, compared to -1.2% in the private sector." This private sector figure is dramatically negative almost entirely because of a large drop in bonus earnings in the financial sector in February and March. (Earnings growth in finance in February was -28.4% because of the drop in bonuses for high flyers.)

The data for April 2009, using figures not seasonally adjusted and excluding bonuses, shows earnings growth of 2.5% in the private sector and 3.3% in the public sector, consistent with IDS research on pay settlements. In the private sector, the official figures show manufacturing (where most freezes are) at 1% and private services at 2.9%.

The recession has hit some companies extremely hard and others much less. There is a spectrum, within which we have found pay freezes at one end and increases up to 4% at the other. It would be quite ridiculous for an urban myth about the private sector to become the basis of policy for the public sector.

Alastair Hatchett, Head of pay services
Ken Mulkearn Editor, IDS pay report, Incomes Data Services