"The difference between earnings growth and pay settlements is a common source of confusion. Why is it that the measure of average earnings growth across the whole economy published by the Office for National Statistics is typically a percentage point or more higher than the median level of pay settlements? Over a six-year period from 1998 to 2004, earnings growth has been running at around 1 to 1.5 per cent higher than the median level of pay settlements across the economy, recorded in the Incomes Data Services Pay Databank. This article explains the differences between the two measures. The gap between earnings growth and pay settlements is commonly termed as 'pay drift'. Some of this drift may be not particularly controlled, but some may be better termed 'pay drive', where the extra money is intentional and planned. This report was written by Sarah Miller of Income Data Services."

Support: Paper