Workers ‘showing restraint on pay rises’

Jul 17 2008 by Graeme King, The Journal

MANUFACTURING workers are accepting pay freezes and wage increases less than the rate of inflation rather than face the sack, new research indicates.

The manufacturers’ organisation EEF showed nearly over half of companies surveyed had struck pay deals at 3% or less in the second quarter of this year, with over 6% securing a pay freeze. And the number of companies agreeing to put off agreeing their annual pay deal has risen to its highest level for more than five years, at 7% of those surveyed.

This comes on the day jobless figures across the region rose, but unions were quick to say that the restraint shown by manufacturing workers ought to be rewarded once the economy is in better shape.

The research by EEF, with 500 members in the region, does not paint an entirely gloomy picture for workers, with many pay deals being struck at above 3%, and 13.5% of companies offering a rise of over 4%.

EEF Northern regional manager Tony Sarginson said: “The relatively low level of pay settlements, together with the rise in the number of companies deferring their agreements, confirms the tougher economic climate. We know of a well known company in the region which negotiated a pay award of below inflation, and their negotiator described it as a ‘stay in the game’ deal to weather the economic storm. They would have liked to offer more, but could not afford it.

“Workers seem to be reluctantly but responsibly accepting that position. Maybe 10 or 12 years ago they would have been out on strike, but with globalisation, rising fuel costs, etc, people are seeing that a job with a modest pay rise is better than no job.”

Experienced economist Ian Shepherdson, now living in Newcastle, said: “This report looks like a very welcome burst of realism. As (Bank of England governor) Mervyn King has made clear, we can’t pay our way out of petrol and food price rises. If we want interest rates to come down, we have to allow the headline rate of inflation to make us poorer for a while. History shows us again and again, that it’s better to be a little worse off now, rather than a lot worse off later.”

Kevin Rowan, northern regional secretary of the TUC, said: “We have witnessed considerable pay restraint from North East workers and this survey reflects that – it also reflects the general pessimism that exists in the private sector.

“When the economy picks up again, employers should properly reward those workers who have shown restraint in difficult times.”

Liz Smith, assistant regional director of the CBI, said: “Our experience is that there is a mixed picture in manufacturing at the moment, the North East is well endowed with exporters, and companies exporting into the eurozone are finding that demand is holding up. It’s encouraging to see that manufacturers are managing to maintain control of their cost base, and that the UK workforce is taking a pragmatic approach on wage negotiations in the current economic climate.”