News

15.03.17

Public sector wages in sharp decline as real pay levels fall

Public sector pay is in decline and likely to continue decreasing for the next few years, the Resolution Foundation’s forecast taken from ONS’s figures for Q4 have today revealed, with unions arguing there is now an “overwhelming and unarguable” case to end pay cap to prevent a further decline in living standards.

Shockingly, the report forecasted that the average public sector salary by 2019-20 may be no higher than it was more than 10 years ago in 2004-05, and £1,700 lower than it was in 2009-10.

Despite a rapid rise in average pay in 2015 and 2016, growth in pay is now slowing considerably, as figures published by ONS found that in the year to January 2017, growth stood at 0.8%, a full 2% lower than a year earlier.

It also warned that with inflation on the rise, it was likely that average pay growth would turn negative within the next few months – something that will be unwelcome news in light of average earnings standing at £23 a week less than at its pre-crisis peak.

The Foundation also predicted that public sector pay would be hit particularly hard, as real annual growth in January had fallen to -0.1%, in contrast to the private sector which had grown by 1% – this follows the IFS saying that the pay-gap between the public and private sector had now fallen back to “pre-crisis levels”.

The report, drawn up by the Foundation’s economic analyst Adam Corlett, warned of the detrimental effect that this pay drop could cause: “Whatever the other pros and cons of the current public sector pay policy, these wage falls will have a direct impact on living standards.”

Some workers will also feel the pay fall as part of a “double whammy” alongside working-age welfare cuts, according to Corlett.

“Pay cuts could also be expected to make it harder to recruit new workers in the public sector,” he said. “Where this pressure comes alongside rising demand and uncertainty over migrant worker policy – such as in healthcare – the impact may be compounded.”

The report called on public pay sector policy to be “carefully monitored” in the coming years to ensure that the problem is properly addressed.

Mark Serwotka, general secretary at the Public and Commercial Services Union, warned that the findings should come as a wake-up call to the government to act to decrease inequality for public sector workers.

“There is now an overwhelming and unarguable case to end the public sector pay cap to prevent a further decline in living standards in the coming years” he said. “All the analysis shows wages across the economy are stagnating, but the government can kick-start the revival by lifting the 1% cap in the public sector.

“Since 2010, the government’s own workforce has lost out more than any other sector and these are the ‘just managing’ families the prime minister promised she would help.”

Unison also said that the report made for grim reading. General secretary Dave Prentis explained: “After years of harsh pay restraint, those delivering our public services are facing yet more financial hardship. 

“School staff, nurses and council workers are struggling to make ends meet.”

Prentis stated that if ministers don’t reverse their damaging policy of “zero or one 1% rises” there was also a serious risk of the public sector failing to recruit new talent who would be discouraged by the low wages compared to the private sector.

A Treasury spokesman said: “The Government has made difficult decisions on public sector pay to maintain fiscal discipline and protect jobs.

“The OBR has forecast that current pay policy will protect approximately 200,000 jobs across the UK.”

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