Private sector pay (including bonuses) failed to grow at all between the last quarter of 2008 and the last quarter of 2009, while public sector pay rose by 3.7 per cent.
Average earnings in the private sector were £448 per week in December 2009, unchanged compared to a year earlier as firms were forced to cut costs to stave off bankruptcy. In the public sector average total pay was £457 per week.
With retail price inflation, the measure generally used to determine pay rises, rising 2.4 per cent in the year to December, it means that in real terms private sector workers had a pay cut last year – whereas the public sector enjoyed a real-terms hike.
The great divide in the labour market experience of UK workers piles further pressure on chancellor Alistair Darling ahead of the Budget to address the balance, and slash public sector pay in a bid to reduce Britain’s £178bn deficit.
Labour’s current plan is to halve the deficit in four years while the Conservatives have argued in favour of faster and deeper cuts, though details remain vague.
“The gap between public and private sector wages is unacceptably large, reinforcing the need for a freeze in the overall public sector wage bill, which will be a key measure in reducing Britain’s unsustainable budget deficit,” said David Kern, chief economist at the British Chambers of Commerce.
Overall, the number of people without jobs for more than a year soared by 37,000 in the three months to December to 663,000 – its highest level in 13 years.