LRD Says Pay Freezes To Continue

Labour Research Department

Pay freezes to continue into 2010

While the economy may be poised for recovery, and overall there is a decline in the proportion of freezes in data from the Labour Research Department (LRD), we have not seen end of wage freezes yet.

This is borne out by statistics from LRD’s Payline database. The peak for pay freezes was in the three-month period from April to June, when 25% of all deals and 33% of new deals (i.e. excluding second or subsequent stages of long-term pay agreements) were freezes. This period also saw the highest number of wage cuts registered on Payline.

There has been a steady decline in pay freezes as a proportion of all settlements since then: that is, including all stages of long-term deals. In May-July, the proportion of all pay deals was 23%; in Jun-Aug it was 22%; in July-September it was 21%, in August-October (a quiet period for pay settlements) it was 14%. However, it is not possible to state confidently that the trend will continue to be downwards as the figure may have increased again according to the provisional figure for the three months from September to November 2009, to 19% of all pay agreements across the economy (see table/graph below).

However, for newly-agreed settlements (one-year and first-stage long-term agreements), the pattern is less clear. Although there have been periodic decreases since April, it is evident that new deals are still suffering the brunt of freezes, while employers are not showing any obvious signs of relaxing their pressure on pay.

From a high in April-June of 33% of new pay deals, the three-month periods May-July and June-August both saw freezes at 28% of new deals. But they increased again in July-September to 32%, then dipped to 23% in the quiet period over the summer from August to October, then rose again in the latest three-month figures to November, once again reaching 32%. As November has not yet concluded, it is too early to say whether this change is significant.

The figures do not suggest that the rate of pay freezes among new deals has really changed significantly since the depths of the recession. What is more, further pay freezes are expected in the New Year, according to LRD data on long-term pay settlements and already-known agreements.

“The bad news isn't necessarily over even though the recession may soon be,” said Lewis Emery, LRD’s pay and conditions researcher.

“There are known pay freezes coming in the New Year and the continuing rise in unemployment, particularly youth unemployment, means things will be difficult again in 2010. The fact that there is a downward trend in freezes overall could mark a positive turn. But this is not by any means the last we will see of pay freezes."