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Total pay in the UK private sector, including bonuses, rose by 11.7% in the twelve months to March, easily outstripping the 7% increase in the cost of living recorded in the consumer price index. Empirically, we find that changes in bonuses help predict future changes in regular pay: regular pay growth is likely to rise from here, in the private sector at least. Just as striking, perhaps, is the disparity between rates of pay growth in the private and public sectors. Total UK public sector pay rose by just 1.6% in the twelve months to March, with the gap between the rate of increase in private and public sector pay the largest on record. With the UK labour market already very tight, this gap between private and public sector pay growth is unsustainable. Unless it begins to close, and soon, an increase in industrial action, which often takes places during periods of high inflation, seems very likely.
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