Although the take-home pay of private sector employees has hit a 12-month high, it has still not returned to pre-recession levels and contrasts with the “stagnating” situation in the public sector, according to a report.
The VocaLink FTSE 350 Take Home Pay Index revealed that take-home pay in the private sector rose by 1.6% in the three months to October, up from 1.4% in the three months to September.
Although the figure was notably higher than the 0.5% annual growth rate seen in May, it remains down on pre-recession levels and is also below consumer price inflation, which implies that household spending power is still being squeezed.
Public sector take-home pay, on the other hand, stayed at 1.3% in October for the third month in a row. This trend is also expected to persist for at least the next two years in the wake of coalition government pay freezes for workers earning more than £21,000 per annum.
Marion King, chief executive of VocaLink, said: “We expect annual public sector pay growth to fall over the next year as the impact of half a million public sector job losses takes effect and the pay freeze fully sinks in. Meanwhile, at 1.6%, private sector pay is increasing at its highest for 12 months, but with inflation still at 3.1%, even private sector workers continue to feel the pinch.”
Upward pressure on prices is also likely to continue for the foreseeable future following sharp rises in the futures prices of soft commodities such as sugar, coffee, cotton and wheat over recent months and the VAT rise to 20% in January next year.
The Index is compiled from data captured by the automated payments processor from more than 200 FTSE 350 companies and 600 public sector organisations and is analysed by the Centre for Economics and Business Research.
