William Eichler 15 March 2017

Public sector pay to continue falling for ‘rest of decade’

Public sector pay to continue falling for ‘rest of decade’

Average real pay is falling in the public sector and it will continue to fall over the next three years because of inflation and pay restraint, new report reveals.

The Resolution Foundation today published its latest Earnings Outlook which revealed real public sector pay is likely to have started falling in the three months leading up to February.

The think tank found that although real pay performed well in 2015 and 2016, this was largely due to prices not rising at a time of public sector pay restraint. This was undermined by increasing inflation at the end of last year.

The Foundation’s report also said that with the growth in public sector pay limited to 1% for the next three years, real pay is forecast to continue to fall for the rest of this decade.

Average real pay in the public sector will fall back below 2004-05 levels by the end of the parliament (2019-20), according to the report.

On current pay trends, average pay in the public sector would be £1,700 lower in 2019-20 than its peak in 2009-10. Pay growth has been particularly weak, the Foundation noted, in health and social work, and could fall a further 6% by 2019-20.

Pay in public sector education was lower in 2016 than in 2003 and is expected to fall a further 3%, the analysis revealed. Average pay in the public administration sector is also expected to fall a further 3% and be no higher in 2019-20 than in 2003.

However, the Foundation said the very lowest earners will be protected from falling earnings due to planned increases in the National Living Wage.

‘While rising inflation is applying the brakes to real pay growth across the board, the outlook for public sector pay looks particularly weak,’ said Adam Corlett, economic analyst at the Resolution Foundation.

‘While rising inflation is applying the brakes to real pay growth across the board, the outlook for public sector pay looks particularly weak.

‘Pay is now actually falling, and worst is expected to continue for the rest of the parliament, with levels at the end of the parliament dropping back to levels last seen in 2004.’

‘Although public sector pay restraint is important to the Government’s deficit reduction plans, falling real pay is likely to see increasing recruitment strains,’ he continued.

‘The Government should be planning now how to manage those strains, alongside any wider changes to policies like migration that will also have an impact.’

Commenting on the report, UNISON general secretary Dave Prentis said: ‘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.

‘If ministers don’t reverse their damaging policy of 0% or 1% rises it will be harder to recruit new staff or keep those with experience.’

 
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