From the TUC

Low-paid public sector workers face cuts in net pay of up to 10 per cent

30 Jun 2011, by in Public services

TUC analysis, published today, shows that by this time next year (if the Government’s proposed pension contribution increases go ahead) workers across the public sector will find they are experiencing a living standards drop of up to 10%.

The livelihoods squeeze is absolutely not a public sector only phenomenon: workers across the private sector are also experiencing below inflation pay rises with average private sector settlements currently running at 3%, while RPI is 5.2. But the public sector – where pay is currently frozen and where, contrary to what the Prime Minister may claim, remuneration is not generally higher than for private sector workers – is really set to feel the pain.

With just under 6 million workers across the UK (once the employees of nationalised banks are excluded) employed by the state and our analysis suggesting that a 9% fall in their living standards by 2012/13 will not be uncommon, the individual and economic impacts are set to be significant.

The research (.xls file) considers current pay levels among a sample of public sector workers in full and part-time work including nurses, fire officers, teachers, social workers and executive officer civil servants.  It looks at how pay, pension contribution rates and tax paid will be affected in the financial year 2012/13 by the pay freeze, proposed pensions changes and wider tax reforms and then goes onto consider what this means for the proportional difference that there will be between workers’ living standards before and after the austerity measures (measured by their likely actual net pay and what net pay would have been in a fairer set of circumstances).

First off, lets be straight. The Government are right to claim that some of these workers have a limited degree of protection from the austerity measures. Workers whose salaries are under £21,000 per year (full-time equivalent) will receive a flat rate £250 pay increase this year and next and it is proposed that those who earn under £18,000 (again full-time equivalent) gross a year will have more limited increases in their pension contributions, with those on less than £15,000 protected from any increases at all. There are notable exceptions: in particular low-paid employees in local government, most of whom have received no pay rise, and any worker whose part-time salary is less than £21k or £18k respectively but who would earn over this amount if they were in full-time work,  are excluded from the protection packages.  But some attempt has been made to reduce the impacts for the very worst off.

However, this still leaves a very large number of public sector workers facing a significant cut.  The pay freeze means that the value of real pay will fall by a large amount – with RPI hitting 4.6% last year and forecast to be 5.1% over 2011 those workers who have an absolute pay freeze will see the gap between gross pay and inflation rise. But this isn’t the end of the story. The Government also wants to increase the pensions contributions public service workers pay. The proposal is for an increase of at least 3 per cent, phased in over the next three years from 2012/13 to save £2.8bn. Taking the Government’s figures on the way the ‘savings’ will be phased in, this suggests an approximate 1.26 percentage point increase in 2012/13 (followed by the same again in 2013/14 and a further rise in 2014/15 –  amounting for many to a 50 per cent increase in contribution levels).

Next year, this will mean that most workers are contributing above 7.5 per cent of their gross salaries to their pensions, with some paying even more (for example contributions to the fire service scheme will, if proposals are enacted, hit 9.96 per cent in 2012/13, and even higher for members of the pre-2005 scheme). Of course contributions are deducted before income tax is calculated, so higher percentage contributions do mean small falls in the proportion of workers’ salaries that are taxed. The impact of the pay freeze on gross pay will also reduce the taxable earnings of public sector workers from what they would have otherwise been and the Government’s raising of the personal allowance in 2012/13 will provide an additional £126 to many workers on median pay.

So, where does that leave us? Has the raising of the personal allowance, reduced income tax and limited protection for the low-paid offset the worst impacts of public sector austerity? The answer is a resounding no. As the table below shows, workers across the public sector are facing significant living standards cuts come 2012/13.

Description Net pay 2012/13 after contributions increase & pay freeze (inc £250 annual uprating for low-paid) Effective % change in living standards by 2012/13 Real terms loss per week
FULL-TIME
Nurses £21,313.47 -9.2 -£41.40
Fire service officers (leading fire officer and below) £21,363.07 -9.2 -£41.63
Social workers £22,170.27 -9.2 -£43.29
Secondary education teaching professionals £25,286.59 -9.3 -£50.13
Civil service executive officers £19,187.55 -9.0 -£36.57
Nursing auxiliaries and assistants £14,199.41 -6.5 -£19.04
PART-TIME (assume contribution rate for full-time salary)
Nurses £13,173.25 -8.5 -£23.50
Fire service officers (leading fire officer and below) £6,569.47 -10.1 -£14.27
Social workers £13,845.02 -8.6 -£24.98
Secondary education teaching professionals £17,238.02 -8.9 -£32.43
Civil service executive officers £12,790.24 -8.4 -£22.56
Nursing auxiliaries and assistants £9,303.24 -4.4 -£8.27

Some of the lowest paid receive a degree of protection – but are still going to face significant living standards falls. For example, a part-time nursing assistant on just over £10,000 will see a 4% reduction and a part-time civil service administrator will see a 8.9% cut. And the exclusions (referenced above) from protection matter. For example, a part-time fire service officer earning £7,280 a year is set to experience a living standards fall of 10.1%. This is in fact higher than the cut that many higher paid workers are set to experience. The reason? A full-time fire service officer would earn around £30,700, so the part-time employee doesn’t benefit from lower pension contribution increases or from the limited pay freeze exemption.

In 2013/14 the pay freeze will end – and unions will be keen to bargain for the highest possible future settlements to make up for lost ground. But with further increases in pension contributions proposed for 2013/14 and 2014/15 times, and tax credit cuts, particularly for working parents using childcare, continuing to take effect times will still feel tough. In this context it seems fair to question whether public sector workers, delivering vital jobs across the country, are being asked to pay a fair price for the financial crisis.

3 Responses to Low-paid public sector workers face cuts in net pay of up to 10 per cent

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