The public sector pay cap has reduced spending power in England by £8.5bn this year, according to the TUC.
The Trades Union Congress (TUC) says public sector workers have had £48bn less to spend in local economies since the Government imposed pay limits in 2010.
TUC General secretary Frances O’Grady rejected the pay cap as a 'false economy'.
Research by the TUC shows that England’s 50 poorest parliamentary constituencies alone have seen a combined loss in spending power of £3bn since 2010, or £544m this year.
It says public sector workers are earning at least £2,000 less on average today than if their pay had risen in line with inflation.
TUC general secretary Frances O’Grady said: 'The public sector pay squeeze has driven up in-work poverty and that means less money spent on high streets and in local businesses.
'The pay cap is a false economy. The Chancellor must use the Budget to give all public sector workers the pay rise they have earned, and end these artificial pay restrictions.’
The Prime Minister announced last September the Government was planning to give the lowest-paid public sector staff a pay rise in line with inflation in the Autumn budget.
However, the assistant general secretary of the union Unite, Gail Cartmail, warned at the time the proposals were a ‘drop in the ocean’.
‘The Government’s proposals, which will not even come into effect until 2019 for many workers, are a drop in the ocean and will do nothing, to address the years of pay cuts our public servants have had to endure,’ she said.