Reversing key worker pay cuts could see £3.3bn boost

The TUC union has said that the economic recovery can be sped up by reversing cuts to key workers’ pay, boosting the country’s economy by £3.3 billion at the same time.

The analysis models the economic impacts of reversing cuts to the value of public sector pay that took place over the period 2010/11 to 2020/21. It finds that England’s economy would receive a £3.3 billion boost, speeding up recovery from the pandemic and making pay rises for other workers more likely too – the ‘pay circle’ effect. The £3.3 billion economic boost is based on restoring median public sector pay by 3.2 per cent in line with CPI inflation.

The TUC and Landman Economics says that the move would also make 4.3 million public sector workers better off – in some cases by thousands of pounds a year.

The analysis is part of a policy briefing sent by the TUC to all MPs today, which sets out the importance of protecting the pay circle – the chain of spending that connects workers’ wages around the whole economy. The union body is calling on the government to protect the pay circle and prioritise pay rises for public sector key workers across the period of the forthcoming spending review.

Frances O’Grady, TUC General Secretary, said: “We’re all part of the same pay circle. When key workers spend their pay, it goes into other people’s pay packets. Nurses, carers, shop staff, drivers, small businesses – right around the economy, we’re all connected.

“It is up to government to keep the pay circle moving. If the Chancellor gives key workers the pay rises they’ve earned, it will protect the spending businesses need to recover. And that will help other workers get pay rises too. But if the Chancellor attacks the pay circle in his spending review, everyone will suffer. And we could have another slump in living standards across the whole economy.”