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Median pay increases according to IDS

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The median pay settlement level has increased from 2.2% to 2.8% in the three months to January 2011, according to the Incomes Data Service.

The IDS report found nearly half of awards are at 3% and above. The latest data indicates the influence of higher inflation and the improved economic outlook, particularly in manufacturing, where most of the January settlements are concentrated.

There are no public sector awards in this analysis, so the whole-economy picture is really a private sector one. Nearly three-quarters of awards in this three-month analysis period were in manufacturing, where the median is 2.9%.

A smaller proportion of awards were in private services, however the median here has increased sharply, also to 2.9%, from 2.1% in the three months to December 2010.

This is partly to do with lower awards in the retail sector effective from October falling out of the latest three- month analysis, but there are some new awards at higher levels as well.

The number of long-term deals, where companies and trade unions enter into mutually binding deals with pre-agreed pay increases for a certain time period, appears to be increasing. Of the awards at 3% and above, two-thirds were increases under long- term deals. A number of long-term deals are linked to RPI inflation which has resulted in these higher pay awards.

Despite the picture on long-term deals, a number of new, 12-month pay settlements are also coming through at higher levels. The median pay settlement level excluding increases set under long-term deals is 2.5%.

Ken Mulkearn, editor of IDS Pay Report, said: "Our latest figures show wage rises have picked up in manufacturing and the level of awards in private services appears to have picked up too. The number of awards at 3% or above has been rising and this has emerged as a key figure in pay setting. However, pay awards are still trailing some way behind inflation. This gap looks set to continue if inflation continues to rise'.

Commenting on the latest pay settlements survey published today (Thursday) by Incomes Data Services TUC General Secretary Brendan Barber said: "As more companies move back into the black, increased profits are being reflected in improved pay settlements.

"But wages are still losing ground to rising living costs and the government is pushing through a downward wage spiral in the public sector - with pay freezes and bigger pension contributions - while inflation is around 5%.

"This combination of tough pay settlements, tax rises and tax credit cuts due to start in April means that ordinary workers, and working families in particular, are about to experience one of the toughest income squeezes for a century - one that will test the economy's ability to bounce back."