Public sector workers have become the first group to suffer a cut in real wages since the recovery of 2014 as forecasters predicted that the rest of the working population would follow suit later this year.

The Resolution Foundation said the situation for 5.4 million public sector workers is expected to worsen over the rest of the decade as pay restraint and high inflation eat into their take-home pay and living standards.

The independent thinktank forecast that median real pay for the average public sector worker would fall below 2004-05 levels by the end of the current parliament in 2020.

On current trends, the average pay of public sector workers will be £1,700 lower in 2020 than its peak in 2010, it said.

Pay figures for the years after the financial crash in 2008 show that private sector workers bore the brunt of the slump in wages. While private sector workers suffered wage freezes or worse, public sector pay improved, offsetting steeply rising inflation. But since the economy picked up in 2014 and prices flatlined, private sector workers have grabbed the lion’s share of inflation-busting wage rises.

Official figures for 2016 showed that full-time employees in the private sector enjoyed an increase of 3.4% in median weekly earnings on a year earlier compared with a 0.7% rise for workers in the public sector.

Inflation jumped to 1.8% in January and is expected to rise between 2.5% and 4% by the end of the year.

The Resolution Foundation said pay growth has been particularly weak in health and social work and could fall by a further 6% by 2020, though the lowest earners will be protected from falling pay because of planned increases in the national living wage.

A study in January by the TUC calculated that midwives, teachers and social workers would see their real pay, which accounts for the impact of inflation, drop by more than £3,000 by 2020 if the government sticks to plans to limit salary increases to 1% a year.

Adam Corlett, an economic analyst at the Resolution Foundation, said: “While rising inflation is applying the brakes to real pay growth across the board, the outlook for public sector pay looks particularly weak.

“Pay is now actually falling and, worse, is expected to continue for the rest of the parliament, with levels at the end of the parliament dropping back to levels last seen in 2004.

“Although public sector pay restraint is important to the government’s deficit reduction plans, falling real pay is likely to see increasing recruitment strains.

“The government should be planning now how to manage those strains, alongside any wider changes to policies like migration that will also have an impact.”

Philip Hammond promised increased spending on schools in his spring budget, but the chancellor said the extra money would be spent on opening new schools and not increasing teachers’ pay or the amount spent on each pupil.

Central government departments and local authorities must also find extra savings to meet more aggressive budget targets, limiting the scope for incremental increases in staff pay outside the annual pay constraints.