Despite the economy being on the mend, over 16 million workers (57 per cent) do not expect a pay rise this year, and those who do can expect a rise of just 1.9 per cent - a net monthly increase of just £27, according to a new report from independent price comparison and switching service, uSwitch.com
With the cost of living rising at nearly double the rate of salaries, 5.4 million consumers (11 per cent) are spending more than they earn while over one in four (26 per cent) have nothing left in their bank account at the end of the month.
And with the majority of those asked seeing no clear signs of recovery on the horizon in terms of pay, uSwitch.com says it's hardly surprising that 31 per cent of consumers believe they will be worse off this year than last.
While over 16 million (57 per cent) do not expect any pay increase at all, over nine million workers foresee their pay rise fall short of both the RPI (3.7 per cent) and CPI (3.5 per cent).
The average gross salary this year after a 1.9 per cent increase will be £24,425, but the report highlights that the gap between public and private sector pay is shrinking. 2010 pay rises show a 26 per cent gap between the two groups compared to a 66 per cent gap in 2008.
Public sector workers are set to take home an extra £23 a month while those in the private sector can expect an additional £35 in their pockets.
Despite the closing gap, nurses, civil servants and teachers believe that they face a particularly dim year.
While 40 per cent of nurses surveyed do not expect any increase this year, those responding more positively estimate a 1.4 per cent rise; 43 per cent of teachers do not expect a rise but those who do anticipate a 1.8 per cent rise; and while over half (53 per cent) of civil servants foresee a zero increase, the lucky few expect a 1.6 per cent rise.
According to the report, among those set to be best off this year are bankers and lawyers, anticipating pay rises of 2.7 per cent and 2.9 per cent respectively.
With salaries failing to keep up with the cost of living, consumers are increasingly relying on debt to fund their lifestyles.
Over 5.4 million consumers spend more than they earn, with a further 13 million just breaking even at the end of every month. Worryingly, says uSwitch.com, the number of people living beyond their means has risen by 12 per cent since 2008.
Nearly half (48 per cent) of those spending more than they earn rely on overdrafts to fill the gap between their income and their outgoings, while over a third (34 per cent) use credit cards to keep them afloat.
uSwitch.com says the nation's love affair with plastic shows no sign of letting up, with 21 million using their credit card at least once a month, up 4 per cent from 2007.
Excluding mortgages, the average household debt in the UK is £9,000, which increases to £18,722 when unsecured loans are taken into account. In total households are faced with average debts of £57,937 including mortgages.
According to the Bank of England, January's 3.5 per cent inflation spike was directly due to three ‘short-run' factors: the rise in VAT from 15 per cent to 17.5 per cent, a 70 per cent increase in oil prices and the impact of a sharp fall in sterling in 2007 and 2008 which pushed up import prices.
While these factors are considered to be temporary, its prediction that inflation is likely to remain above the Government's 2 per cent target for the next few months offers no comfort to the millions of homes struggling to make ends meet.
"The Government is going to have a hard time persuading people that things are on the up when over half the workforce is witnessing a zero per cent pay rise,” said Ann Robinson, Director of Consumer Policy at uSwitch.com.
“This will do nothing to improve consumer confidence - a key factor if the economy is to claw its way out of recession. Taking second or third jobs to fund lifestyles is becoming increasingly difficult for a nation that already works the longest hours in Europe.
"Consumers face a double threat - the Government is toying with measures such as raising taxes to reduce the public deficit, which will have a direct impact on personal finances.
“When coupled with lower than anticipated salary increases it can only mean that we are in for a bumpy ride, and the situation could get worse before it gets better.
"With the pay crunch continuing to bite, consumers need to start paying serious attention to their spending habits. Short-term debt solutions may seem an efficient way to fund spending, but they can lead to severe long-term debt issues if not managed properly.
“Consumers have little scope for reducing their own budget deficits unless they work harder to strip down their essential bills to the bare minimum, rather than continue to plug the hole by borrowing."
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