December 4, 2022

The government’s 5% wage offer to public sector workers was an attempt to address a host of pressing problems – staff shortages, impending strike action, soaring inflation and pressure on household budgets – while Britain’s next prime minister still has plenty to do. fiscal firepower left to cut taxes. In any case, it did not please anyone.

But the government’s partial concession to workers’ demands reflects the fact that market forces, like union activism, are now driving wage growth with inflation over 9 percent and rising.

The deteriorating economic outlook has not yet eased tension in the UK labor market, with figures from the Office for National Statistics showing unemployment still below pre-pandemic levels, layoffs at record lows and job openings — as they approach a peak — at a new record of 1.3 mn.

Against this background, many private sector employers have already been forced to raise wages sharply to attract and retain staff. Business leaders who testified to MPs on Tuesday said pay now stands at 6 to 7 percent, with many negotiating a mid-year increase to compensate workers for rising living costs, on top of the usual annual increase.

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The ONS data showed that private sector wages grew nearly five times faster in the year to May than those of public sector workers, in part because companies in many sectors – not just financial services – have used more freely. of one-time recruitment and retention bonuses.

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“It’s markets, not militancy, that drive wages up,” said Tony Wilson, director of the Institute for Employment Studies, noting that wages have risen fastest in sectors such as hospitality and IT where job openings are highest. was – with the public sector far behind.

The ministers’ decision to approve wage agreements for 2.5 million public sector workers, averaging about 5 percent, reflects recognition that such a large gap between the private and public sectors is no longer tenable – with recruitment difficulties among important services and the threat of strikes looming.

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The government claimed that most general pay in the public sector would be comparable to those in the private sector, arguing that it couldn’t have gone further without fueling persistently high inflation, leaving people worse off in the long run. to be.

But the outraged response from public sector unions suggests that ministers have not gone far enough to avert the threat of union action or solve recruiting problems.

Union leaders described the wage agreements for their respective members as “pathetic”, “disappointing”, “completely inadequate”, a “grave misstep” and “a kick in the teeth”.

The British Medical Association said a 4.5 percent pay increase for doctors not covered by existing multi-year pay agreements represented a “cruel” pay cut and “a betrayal of the profession”.

While pay increases will in most cases be more generous for workers at the lower end of the pay scales, the union congress said the NHS settlement this year would cut hospital porters’ pay by £200 in real terms, and nurses’ real pay by £1,100. and those of paramedics with over £1,500. Frances O’Grady, general secretary of the TUC, said the award would “hit morale at a time when staff are leaving en masse and staffing shortages are crippling vital services”.

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But while the rewards aren’t generous enough to quell the wrath of many public sector workers, compared to previous plans, they will cost enough to leave public sector managers facing very difficult decisions as there are no new ones. money from the Treasury is .

Ben Zaranko, an economist at the Institute for Fiscal Studies, said existing spending plans cannot easily accommodate 5 per cent wage awards – which would cost about £7 billion more than previous plans – but that providing the required funding would be “clearly unattractive to a series of aspiring prime ministers who all want to cut taxes.”

Geoff Barton, general secretary of the Association of School and College Leaders, labeled pay for teachers “the worst of all worlds” as teachers would face significant pay cuts in real terms, while the higher wage bill puts already severe pressure on the school would exacerbate budgets.

Anita Charlesworth, research director at the Health Foundation, said the new offer to NHS staff meant trusts were given “an almost impossible task that they are set to fail” as they already had to make major efficiency savings.

She also questioned the decision to target pay to the lowest paid staff, saying this was understandable given the rising cost of living, but could make it harder for the NHS to retain more experienced staff.