21 September 2017

The Institute of Fiscal Studies (IFS) has warned the government that recruitment, retention and motivation is being harmed by the public sector pay cap.

If the government sticks to its original plan of a 1% limit on pay rises up to and including 2019-20, then public sector pay growth will fall significantly behind that of the private sector, the think tank cautioned.

Indeed, public sector workers have actually experienced significant pay cuts in real terms, with a recent government report revealing that teachers have seen their average wage fall by £3 an hour and police officers by £2 an hour due to salary increases falling behind the rate of inflation.

The IFS reported that average pre-tax weekly earnings in the public sector were 4% lower in real terms in 2016-17 than in 2009-10, which equates to around £22 per week lost by those employed by the state.

This discourages people from joining and staying in public sector organisations, especially for higher-skilled workers (whose wages are particularly low compared with their private sector peers) and those who live in the South East and London where living costs are higher.

The Institute of Employment Rights supports an end to the public sector pay cap, and recommends the government works with trade unions to negotiate pay and conditions across the sector.

In our Manifesto for Labour Law - 25 recommendations for reform, some of which have been adopted by the Labour Party as a blueprint for its own employment rights policies – we propose the reinstatement of sectoral collective bargaining across the economy. Through this process, employers' associations and trade unions can negotiate everything from minimum wage rates, training, apprenticeships, holiday allowances and sickness policies to dispute resolution procedures at an industrial level. These agreements can then be built upon at enterprise level.

Much modern research has shown that high collective bargaining coverage diminishes inequality, boosts productivity, and benefits the economy as a whole.

Click here to read more about our Manifesto for Labour Law