National Minimum Wage

Chapter 5: Setting the Rate
5.19 As there are no official measures of pay settlements we have again looked at data published
by the manufacturers’ organisation (EEF), and pay specialists Incomes Data Services (IDS),
Labour Research Department (LRD) and XpertHR, augmented by analysis from the Bank of
England and the CIPD. The latest available published data related to the three months to
November 2011. They showed the whole economy median level of settlements between 2.0
per cent and 3.0 per cent, depending on the pay specialist, a range that had been reasonably
consistent since the first quarter of 2011. The level of pay freezes in the private sector overall
had fallen to less than 10 per cent of awards, although EEF reported a rate of 15 per cent in
manufacturing. IDS showed substantial variation in median settlement levels by sector: the
median level in both the public and not-for-profit sectors was 0 per cent; and while the
median in the private sector was 2.5 per cent overall, it was 3.1 per cent in manufacturing,
2.5 per cent in services and 2.0 per cent in construction. In a specially commissioned report,
IDS (2011c) noted that in low-paying sectors the median award was 2.2 per cent, but the
median in retail was 2.0 per cent, and in hospitality 2.6 per cent.
5.20 Mean settlement levels were somewhat lower. The average of awards weighted by
employee numbers in the three months to November was 1.5 per cent according to XpertHR
and 1.6 per cent according to IDS. These figures should be treated with some caution as they
can be highly volatile from month to month and are heavily influenced by the public sector
where a limited number of settlements covers a very large number of employees. The private
sector settlement mean calculated by the Bank of England from a variety of sources was 2.2
per cent in the twelve months to September 2011.
5.21 Some of the pay specialists provided our Secretariat with their then unpublished settlement
figures for the three months to December 2011. These suggested a narrowing of the range
of medians to 2.5-3.0 per cent. They were also able to provide some initial analysis of January
2012 awards, an important month as it covers around a third of all settlements. This showed
a further narrowing of the range of medians to 2.8-3.0 per cent. However, they cautioned
against putting too much weight on the medians at that stage, as comparatively few awards
had yet been recorded, and those that had tended to be dominated by existing, RPI-linked,
long-term pay deals. They also noted that practically all the awards related to the private
sector, the majority in manufacturing where awards had recently outstripped those in the
much larger service sector. They drew attention to a similar trend in the early months of 2011
and thought that the medians might fall back as the influence of long-term deals declined,
and the generally lower public and service sector awards started to ‘kick in’ from April 2012.
5.22 We were also able to draw on surveys of employer intentions carried out in the latter months
of 2011. Both the XpertHR and CIPD surveys suggested that around a fifth of all employers
were not expecting to make an award in 2012, but for those that were the median private
sector award was 2.5 per cent. There was, however, a large variation by sector around this
figure and, according to XpertHR, the retail and wholesale sector had a somewhat lower
forecast median of 2.0 per cent. An IDS survey suggested a slightly more bullish outcome in
that 80 per cent of surveyed employers expected to make the same or a higher award this
year than last. IDS thought this might increase the award median to 3.0 per cent. CIPD also
regularly surveys employees. Its November 2011 survey indicated that a third of employees
expected a pay freeze in 2012; some 58 per cent expected a pay rise with a median private
sector expectation that this would amount to a 3.0 per cent increase.
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