Yorkshire and the Humber
The research shows that on average, each individual parliamentary constituency in Yorkshire and the Humber would benefit from a £6 million economic boost. In the process, the key worker pay cut reversal would result in 448,000 public sector workers in our region being better off financially, potentially by thousands of pounds a year.
The UK economy
On a wider level, reversing the key worker pay cut would give England’s national economy a £3.3 billion boost if median public sector pay was restored by 3.2% in line with CPI inflation.
CPI vs RPI
The study also highlighted the enormous difference between the consumer price index (CPI) and the retail price index (RPI). The TUC pointed out that using CPI can result in an organisation underestimating how quickly and severely the cost of living is rising, which is why RPI is a more suitable yardstick during pay negotiations.
To demonstrate how different the two measurements can be, if the Chancellor restored median public sector pay by 10.1% in line with RPI inflation, it would boost Yorkshire and the Humber’s economy by £1 billion (more than three times higher than when CPI is used as the reference), and England’s economy by a staggering £10.5 billion.
Pay cuts for public sector key workers
This research was carried out following the Chancellor’s pay freeze that applies to the majority of public sector key workers, such as police, teachers and civil servants. Though key workers who are currently on less than £24,000 a year are guaranteed a pay rise of £250, this hasn’t been guaranteed for future years.
In terms of pay rise percentages, the government has offered increases of 1.5% for higher education staff, 1.75% for local government staff, and 3% for NHS staff. Despite this, many key workers are ineligible for these pay awards, such as any NHS cleaners and porters who are outsourced from external agencies.
Meanwhile, CPI inflation is currently at 3.2% and RPI inflation at 4.8%, which means that even key workers who receive a 3% pay rise will actually have disposable income than before.
More about the pay circle
We briefly mentioned the pay circle above, which is the chain of spending that connects workers’ wages throughout the whole economy. The TUC rightly says that the pay circle should be protected, as wage freezes and pay cuts damage the pay circle and have a wider knock-on effect.
In short, the TUC notes that all types of workers are connected in the same pay circle. When nurses, care workers, teachers and other public sector key workers are forced to cut their spending, it impacts the wages of other workers too due to an economic downturn.
As the TUC has clearly said, cuts to key workers’ wages negatively affect everyone. Meanwhile, reversing the cuts would result in key workers having more money to spend on products and services, which protects the pay circle and facilitates faster economic recovery both regionally and nationally.
To keep up to date with the latest economic developments, make sure to watch or read about the Chancellor’s autumn Budget on Wednesday 27th October 2021.
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