8 May 2011 Last updated at 20:49 ET

Public sector pay gap 'increases'

Policy Exchange director Neil O'Brien said public sector pay had got "hugely out of control".

Pay in the public sector in the UK has risen faster than in the private sector, a report for a think tank says.

The centre-right Policy Exchange said public sector wages were rising while many in companies were seeing "drastic cuts" in their standard of living.

It said the gap between equivalent workers in both sectors was more than 30% when based on hourly pay.

But the TUC said the report was aimed at creating divisions between public and private sector workers.

"The truth is that both are having a terrible time," said TUC general secretary Brendan Barber.

"Public sector workers are facing a pay freeze, job losses and have already seen the value of their pensions cut by 25%."

The report said the gap - or pay premium - between what a typical public sector worker earns above their equivalent in the private sector has increased to 16.5% over the past two years for salaried workers.

But it says this has risen by 35% for workers paid by the hour, despite efforts by the government to reduce the public sector wage bill.

At the same time, real pay has fallen for the bottom 30% of private sector workers.

The report found that in Scotland, Wales, the North East and North West of England, a typical public sector worker can expect to be paid a fifth more than the typical private sector worker.

It says the only group where private sector pay was higher was for the top 10% of earners.

Policy Exchange director Neil O'Brien said public sector pay had got "hugely out of control".

"It is unreasonable and unfair to expect private sector workers to make all the sacrifices," he said.

"We need a much better-balanced system of public pay, with organisations like the NHS and schools given greater freedom to vary pay so they can attract staff but also get value for the taxpayer."

Brendan Barber said both sectors were facing pay freezes, job losses and pension devaluations.

He said: "The government's policies of deep, rapid cuts are doing grave damage to the whole economy, and ordinary workers in every kind of job are suffering the longest decline in living standards for decades."

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