New research by the Public and Commercial Services union could provide the answer to the much-debated question of why employment is rising but our economy is still flatlining.
Figures show that since the onset of recession in 2008 the real value of wages has fallen by 7%, or more than £50 billion a year. During the same period there has been a real terms drop in consumer demand of 5%.
A report by the union, Britain Needs a Pay Rise, published on Tuesday, February 12, argues this fall in the value of pay could be a major obstacle to the return of economic growth.
It says the government’s policy of public sector pay restraint has had a negative influence on wages within the labour market, and busts the myth that civil servants are paid more than their private sector counterparts.
Using data from the Office for National Statistics and research by the Institute for Fiscal Studies, and government departments, employment specialists Croner and Incomes Data Services, and the Resolution Foundation, other findings include:
- The government’s four-year pay policy, plus the increase in pension contributions, will cut almost £7 billion a year from the value of public sector employees’ pay by 2015
- Median pay in the civil service is 4.4%, or £1,263, lower than median pay in direct private sector comparators
- At executive officer level civil service pay was 10% below private sector comparators and at administrative officer level it was 8%
- These discrepancies in pay for executive officers and administrative officers are found in every nation and region in the UK
The report aims to generate a serious debate about the effects of low pay and government pay policy on the UK economy.
It comes as 250,000 members of the union who work in civil and public services start voting in an industrial action ballot over cuts to their pay, pensions and terms and conditions. The union has asked for a pay rise for civil servants of 5% or £1,200 and for the living wage to be written into government contracts with private sector employers.
While ministers are not able to increase wages across the whole economy, increases in public sector pay and the national minimum wage – and support for the extension of the living wage by insisting on it for government contracts – would stimulate demand and act as a catalyst for the private sector.
PCS general secretary Mark Serwotka said: “Almost everyone can now see that austerity is not working. The chancellor George Osborne is borrowing more for failure, we are on the verge of a triple dip recession, food banks are on the rise and pay day loan sharks are preying on the vulnerable.
“We believe the government’s pay policy, built on the lie that hardworking civil servants are paid too much, is having a seriously damaging effect on the whole economy.
“Instead of burying their heads in the sand and hoping for the best, ministers can and should act now to put money into people’s pockets and back into our economy.”
(from a press release)
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