“Public servants are being asked to accept a permanent deep cut in their living standards,” thundered TUC boss Brendan Barber.
Meanwhile George Osborne described the public pay freeze up to 2015 and the one per cent cap on increases in the two years after that as “fair to those who work to pay the taxes that will fund it.”
So who is right? And what is the gap between public and private pay?
The Office for Budget Responsibility believes average wages across the UK fell 2.3 per cent in real terms – a post-war record.
The OBR does not give a breakdown of pay by sector, but the Institute for Fiscal Studies (IFS) does.
The IFS estimates male public sector workers are paid 4.3 per cent more per hour than their private counterparts, whilst female workers receive 10.5 per cent more, once factors like education, age and length of service are taken into account.
That gap expanded rapidly during the recession – pre-agreed wage rises in the public sector continued while private pay plummeted.
This is not set to last. With the pay freeze, private sector wage increases will outstrip those in the public sector, eliminating the gap by 2014-15.
However, the “pay freeze” is not quite as tough as it sounds – average earnings are expected to grow two per cent in this financial year, 0.8 per cent in the next and 2.6 per cent in the two after that, as staff are promoted and so receive pay rises.
By that point the OBR predicts inflation will have fallen to two per cent, so real wages will be rising.
THE VERDICT | NO, IT ISN’T
Brendan is talking it up
Barber is right that real wages have fallen. However, the pay freeze is not all it seems – Osborne may have the data on his side when it comes to what is “fair.”