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Britain needs a pay rise to kickstart growth

On the day when Ed Miliband put the prime minister under severe pressure about declining living standards, newly published 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. In the same period there’s been a real drop in consumer demand of 5%. So says a report, Britain needs a pay rise, published by civil service union PCS, which argues this fall in the value of pay could be a major obstacle to the return of economic growth.

The report aims to generate a serious debate about the effects of low pay and government pay policy on the UK economy. Falling living standards, especially those of the poor and the “squeezed middle”, suck demand out of the economy and increases welfare payments. This makes the recession and the deficit worse not better.

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. report comes as 250,000 PCS members who work in civil and public services start voting in an industrial action ballot over cuts to their pay, pensions and terms and conditions.

PCS 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. Other findings of the report 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, busting the myth that civil servants are paid more than their private sector counterparts.
  • 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.

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 full report can be downloaded here.

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