PCS says new report helps provide answer to why employment is rising as UK economy is flatlining

Tim Lezard

PCS report Britain needs pay rise coverWhile economic commentators focus on the “productivity puzzle”, the PCS says new research could explain why employment is rising while economic growth remains flat.

Official figures show the real value of wages has fallen by 7% – more than £50bn a year – since the 2008 credit crunch triggered the current recession.

During the same period there has been a real terms drop in consumer demand of 5%.

A report by the PCS, ‘Britain needs a pay rise’ (pictured), published today, 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 explodes a 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, government departments, employment specialists Croner, Incomes Data Services and the Resolution Foundation, other findings include:

– The government’s 4-year pay policy, plus the increase in pension contributions, will cut almost £7bn 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%

-Discrepancies in pay for executive officers and administrative officers are found in every nation and region in the UK

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.”

The 8-page booklet has been published as 250,000 members of the union who work in civil and public services start voting in an industrial action ballot over cuts to pay, pensions and terms and conditions.

Negotiators are seeking 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.

Officials argue that increasing public sector pay and the National Minimum Wage – as well as supporting the extension of the Living Wage for government contract workers – would stimulate demand and act as a catalyst for the private sector.

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Tim Lezard

Campaigning journalist, editor of @Union_NewsUK, NUJ exec member; lover of cricket, football, cycling, theatre and dodgy punk bands

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