Pay freezes could lead to more debt

There are concerns that continued pay freezes amongst public sector workers in particular could lead to increased debt, as households continue to struggle trying to cope with soaring living costs on salaries that are not rising. Even employees that are receiving a pay rise are finding that the increase is nowhere near enough to cover the rocketing cost of living, with prices on food, energy usage, petrol and other household bills soaring.

A study was carried out by the Chartered Institute for Personnel and Development (CIPD), with the results showing that around 75 percent of workers had not received any pay increase this year. With most pay increases being paid between January and May, the CIPD has said that this means that most of this 75 percent would not receive any increase in their wages at all this year.

With regards to public servants, 80 percent said that they had not received any pay increase this year. This followed the announcement by the chancellor, George Osborne, last year who said in his Spending Review that public sector wages would be frozen for two years except for those that were on salaries of under £21,000.

It is though that private sector salaries could see increases this year, mainly because the minimum wage is due to rise in October so some industries will see a sharp increase in salaries such as the hospitality and retail industries.

An official from the CIPD said: “Even those who are lucky enough to get an increase in their pay will find it below the current cost of living, compounding consumer belt-tightening. We will see some increase in the number of private sector workers receiving a pay award in the second half of 2011, especially in the retail, catering and hotel sectors, as the increase to the national minimum wage comes into effect in October.”