TUC on IFS pay and pension findings

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date: 30 January 2012

embargo: 00.01hrs Tuesday 31 January 2012

Commenting on the Institute for Fiscal Studies' (IFS) analysis of the impact of changes to public sector pensions and pay published today (Tuesday), TUC General Secretary Brendan Barber said:

'This report examines only one of the three major changes to public sector pensions. As its analysis concedes, the switch to CPI indexation has had a huge impact on future pensions. Similarly the big increase in contributions immediately reduces the cost of public sector pensions by taking a big chunk out of most public servants' pay.

'The IFS draws its conclusions only from changes in scheme design, where union negotiators - aided by the great support for the TUC's day of action on November 30 - were able to win concessions. But if you take the package as a whole there can be no doubt that many public sector workers may have to pay more, work longer and get a pension that will not keep up with the proper measure of the cost of living.

'The current pay freeze and the one per cent cap on future increases will ensure public sector workers enjoy an equality of misery with employees in parts of the private sector. Wages across the economy are running at less than half the rate of inflation.

'And although it's true that during the recession, some private sector workers and their unions accepted pay restraint in return for job security, no similar choice exists for public sector workers. In local government, education, the NHS and the civil service the pay freeze comes at a time when many public sector workers are facing a hike in pension contributions and when 710,000 of them will be losing their jobs.

'Back in 2010 the Chancellor said he wanted to protect the lowest paid by guaranteeing them a minimum pay rise of £250. But hundreds of thousands of low-paid workers in local government, the bulk of them women, didn't receive a penny extra.

'The government's decision to open up every aspect of our public services to the private sector, the abolition of the two-tier code, plans to review TUPE and to explore the scope for regional or local pay bargaining will simply entrench regional inequality and risks opening up a race to the bottom for the pay of the lowest-paid public sector workers.'

NOTES TO EDITORS:

- On Monday the TUC published its own research which shows that the falling proportion of national output that goes on wages means that UK workers are taking home £60bn a year less than workers did 30 years ago. All in this Together? - written by author and academic Stewart Lansley - warns that UK workers are at risk of a near-permanent lowering in the pattern and nature of their working conditions, with disastrous potential consequences for our future economic health http://www.tuc.org.uk/economy/tuc-20547-f0.cfm:

- It shows that earnings took a sharp hit during the recession - dropping from an average increase of 4.2 per cent in 2007 to just 1.7 per cent in 2009 - and there has been no post-crash rebound. In September 2011, nearly two years on from the end of the recession, 99 per cent of pay deals were below RPI inflation - the measure most commonly used in setting pay. At the same time the pay gap between executives and their staff has continued to widen - in 2000 the ratio of FTSE 100 top executive to typical employee pay stood at 47:1, by 2011 it had risen to 102:1.

- In 1978, the total UK wage bill represented 58 per cent of GDP. By 2011 this 'wage-output' ratio had dropped to 53.8 per cent. This falling wage share has been particularly acute for those on low and middle incomes, the wages of the poorest fifth of workers in 2011 are 43 per cent lower than they would have been if the wage share had not fallen since 1978 and the distribution of earnings not been skewed towards higher earners. Workers on middle incomes have experienced a 36 per cent wage loss, while the richest fifth of earners have had a wage loss of just six per cent.

Contacts:

Media enquiries:
Liz Chinchen T: 020 7467 1248 M: 07778 158175 E: media@tuc.org.uk
Rob Holdsworth T: 020 7467 1372 M: 07717 531150 E: rholdsworth@tuc.org.uk
Elly Gibson T: 020 7467 1337 M: 07900 910624 E: egibson@tuc.org.uk

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