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The Firefighters' Dispute: Fanning the Flames?
How is public sector pay agreed?
Many public sector workers' pay and conditions are agreed by national negotiations between employers and employees' representatives. But this process of what is called 'collective bargaining', where negotiators represent the collective interests of each side, has become less common in the last twenty years.
Collective bargaining has the advantage of reducing the complexity of a process which often involves the pay and conditions of tens of thousands of staff. But it can suffer as a result of the confrontational tactics that can be used by either side.
If sufficient numbers of groups of workers call for and receive pay increases well in excess of the rate of inflation, there is a risk that this will push up the Retail Prices Index. At least part of the reason for the Government dismissing the firefighters' demand for a 40% pay rise, is their fear of competing pay claims from other groups of workers. The following diagram illustrates how persistent increases in costs can cause 'cost-push' inflation.
In addition the process often fails to distinguish between living costs and other conditions experienced in different parts of the country. Some pay bodies have tried to solve this problem by making higher pay awards to workers in high cost areas. Look at the jobs advertised nationally and you'll often see a higher level of pay offered to workers in and around the capital city; this is known as 'London Weighting'.