During 2002, growth in earnings in Great Britain was subdued compared with the late 1990s. This picture was seen across the private sector but most markedly in the financial sector, and in bonuses. In comparison, public sector earnings growth remained relatively strong.
Headline whole-economy average earnings growth in the year to December 2002, as measured by the Average Earnings Index (AEI), was 3.8 per cent. This was higher than in the year to 2001, when the growth rate was 3.1 per cent, but lower than in 1999 and in 2000 when growth was 5.5 and 4.5 per cent respectively.
During 2002 the headline rate peaked at 3.8 per cent in the middle of the year and again at the end of the year. This appears to reflect the fact that, although the economy and the labour market improved slightly during the year, they remained weaker than they were.
Part of the slowdown in earnings was accounted for by lower bonuses in the financial sector. This was reflected in the stronger underlying growth rate (as measured by the AEI excluding bonus series) than the whole economy average earnings growth rate. However, the underlying growth rate also weakened slightly during most of 2002, decreasing from 4.9 per cent in October-December 2001 to 3.6 per cent in September-November 2002. It then recovered to 3.8 per cent by the end of 2002.
Average earnings growth: public and private sector, Great Britain
Earnings growth varied between sectors. Apart from a four-month period in mid-2002, public-sector earnings growth continued its recent pattern since 2001 of being higher than private sector growth. In the year to December 2002, headline private sector earnings growth was 3.5 per cent compared with public sector earnings growth of 4.7 per cent.
The period from May 2001 to May 2002 was the first sustained period since April 1993 where public-sector pay growth exceeded the private sector. This was largely attributed to special one-off increases for teachers and nurses paid in April 2001 and to a rise in regular pay in the public administration, education, health and social work sectors.
The growth in headline public-sector earnings towards the end of 2002 is explained by Local Authority settlements. Overall, the ongoing strength of public sector earnings also mirrors the employment picture.
During the year to December 2002, growth in earnings in the manufacturing sector and the service sector was 4.1 and 3.7 per cent respectively. Growth in both series followed very similar paths, weakening at the beginning of 2002 before recovering. However, the trends at the end of the year appeared to be diverging.
The trend for the service sector was similar to that of the whole economy, and appeared to be fairly level, though it might have been weakening slightly towards the end of 2002. In comparison, earnings growth in manufacturing if anything was on an upward trend, despite a fall in output and employment levels.
Source: Average Earnings Index (taken from Monthly Wages & Salaries Survey), Office for National Statistics
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