Workers are increasingly turning to payday loans firms because their wages run out before the end of the month, creating a "debt disease" which is spreading rapidly across the country, a new report has warned.
Research for union Unite among 24,000 workers reveals that one in eight regularly turned to loan companies such as Wonga, Quick Quid and Money Shop to tide them over in the week before getting their wages.
- Workers increasingly getting payday loans
- Wages running out before end of the month
- Two fifths using loans to pay for rent or mortgages
It says workers face "horrific" levels of interest of up to 4,200% as they take out loans averaging £200 a month.
Unite says that at such high levels of interest, it would take people three working days a month to pay back a loan of £200.
Two fifths of those drawing loans used the money to pay their rent or mortgage and food, while a further 15% spent it on utility bills.
Londoners borrowed the most for housing, while workers in Scotland were most likely to use loans to buy food.
A local authority worker from the East Midlands told researchers she would borrow up to £400 and pay back £560, adding that it was difficult to escape from the cycle of borrowing.
The study, conducted by social research firm Mass1, also shows that workers are cutting back on buying healthy food and consider leading supermarkets to be too expensive.
Wage cuts and rising living costs
Unite general secretary Len McCluskey says: "This is the true cost of the banking crisis and this government's mindless austerity addiction.
"Working men and women are under horrific strain, lumped with wage cuts and rising costs.
"Their falling wages simply do not last the month and in trying desperately to get by they are being driven into the arms of vulture lenders.
"The government may crow that it is paying off the deficit, but all it is doing is pushing ordinary men and women deeper and deeper into debt.
"Right now, in this week, thousands will be borrowing to get by, and they will be paying horrific levels of interest on these loans.
"Instead of spending their wages in local shops and businesses, they are handing three days' worth over to companies like Wonga.
"This is a crazy way to run an economy, and it is grossly irresponsible of this government to preside over this spreading debt disease."
The research, presented at Unite's national policy conference in Brighton today, also shows that most workers believe they are worse off as a result of the Budget earlier this year.