Self interest or common sense?

The Daily Telegraph today, in its business section, reports some interesting or even encouraging statistics about pay, in the private sector obviously.

Over half of all employees in the UK have agreed to a deterioration in their pay recently. Nearly 30% have worked unpaid overtime or worked longer hours without extra pay. Roughly 15% have accepted a pay freeze or taken unpaid leave, and a further 7% have taken a pay cut or not asked for a pay rise.

Often the initiative has come from the employer, - for example BT offering to pay 25% of normal pay to any employee who takes a year's (unpaid?) holiday, or alternatively a one-off payment of £1,000 to switch to part-time working. Car manufacturers also had various schemes.

Often it is to save jobs for when the recovery comes, or the market picks up, to remain in employment even if it is costly to the employee.

Unfortunately workers in the public sector, with "safe" jobs and with very good pensions paid for by workers in the private sector, are not showing the same restraint. The Communication Workers in their dispute with Royal Mail actually included pay rise as part of their demand, and other unions are also asking for positive pay increases. The end result for these groups could well be delayed but inevitable job reductions and imposed pay cuts.


The self-restraint and loyalty to employers is admirable, but there is the concern about what happens when the economy begins to recover. If those who have born sacrifices try to make up their losses quickly, employer's costs could rise, and thus prices, and hold back recovery. In addition if there is any inflation, and we know that VAT will give it a boost, any extra green taxes, or any attempt by strong unions to get bigger pay increases because of increased taxation, there could be an inflationary boost which would lead to higher interest rates and job losses. The recovery could be nipped in the bud.