Comment on above inflation pay settlements in January 2007
General Comment
“Of course everyone aspires to at least maintaining and hopefully improving their standard of living. However the pressure in the market remains, particularly with competition from low cost countries and over-capacity in some sectors. The potential risks of above inflation pay awards are two-fold. Obviously there is the localised effect where people could price their company out of existence if their cost base becomes uncompetitive. However there is a wider issue that above inflation pay awards fuel inflation, which in turn may see interest rates rise, increasing costs at both an individual and corporate level. Clearly we wouldn’t begrudge anyone a pay rise but would urge both sides to remain realistic in balancing employees needs and the security of the organisation.”
Specific Questions
Do you think the IDS is reflected in the print industry? (Particularly as there is a lot of industrial unrest at the moment at companies like Paragon, Chesapeake, Alcan, CCA and Diamond?)
Some of these disputes are about working patterns and manning levels rather than specifically about pay so I don’t think you can make a blanket statement that the IDS survey results are reflected directly in the print industry.
How are companies coping with the annual pay rises that it is required to pay due to the national agreement between the BPIF and Amicus?
The Timetable for the National Agreement this year is:
National negotiations take place in the first fortnight in February.
If there is an agreement during the Negotiations it then needs to be passed by
(a) BPIF National Council (7 March)
(b) GPMS (Amicus) national ballot (usually comes through some time towards the end of March).
The Partnership at Work Agreement reached last year between BPIF and Amicus was a landmark and intended to initiate a new era of co-operation rather than conflict so it is unfortunate that there is a spate of disagreements. We cannot comment on the specifics of these disagreements as we do not have access to the detail.
We are not aware of any companies with specific problems relating to last year’s national agreement.
Is it becoming tougher for them to meet these annual rises with margins so tight and competition so fierce?
Yes and this will continue with competition from Eastern Europe and the Far East. It is therefore virtually impossible for companies to pass on cost increase to customers in the form of increased prices.
Should the BPIF and Amicus reign back on pay rises until the industry has recovered?
The bottom line is the industry isn’t going to “recover”. It is a tough competitive market, it has been for some time and it isn’t going to get any easier. Companies have to find ways to be more competitive; be it from increased efficiency, innovative working patterns, new technology or new products which offer more value and can demand higher prices.
Do the companies believe that the BPIF could be doing more?
Can’t comment.
Background
New pay deals are increasing because of pressure from rising inflation, a survey has suggested.
Incomes Data Services (IDS) said its first snapshot survey of the year put wage settlements at about 4%, up from 3% in the last three months of 2006.
January is seen as a key month for pay settlements as it sets the pattern for much of the year.
“In the face of rising inflation, employees are likely to demand higher basic pay increases,” IDS said.
Rate pressure
The IDS survey was based on nine pay settlements which have been agreed in January. It found that the median rise – which takes the highest and lowest pay rises out of the equation – was about 4%, which is higher than inflation.
In November, the government-targeted level of inflation – the Consumer Price Index – rose to a near-decade high of 2.7%, while the broader Retail Price Index (RPI) increased to 3.9%.
Despite the limited range of the survey, BBC Economics Editor Evan Davis said the findings were exactly what the Bank of England did not want to hear as it indicated higher inflation was feeding into higher wages.
If higher wage settlements then feed back into faster inflation, it could lead to pressure for higher interest rates.
This is a link to IDS website:
http://www.incomesdata.co.uk/general/whatisids.htm
