Public sector workers in poorer parts of Britain earn an average of up to £3,200 a year more than their private sector counterparts, according to a new report.
Right-of-centre thinktank Policy Exchange blamed the gap on national pay bargaining and called for public sector employers to be allowed to negotiate salary levels in line with local labour market conditions.
The thinktank said that reducing the pay and pensions of public sector workers to bring them in line with private sector norms would save £6.3 billion a year, which could be spe nt on creating 288,000 private sector jobs in some of the poorest parts of the country.
But unions dismissed the idea of a public sector pay premium as a "myth" and said the report's figures were misleading, as most of the lowest paid public service jobs - such as cleaners, hospital porters, care assistants and school cooks - had been outsourced to the private sector, leaving higher paid employees like judges, doctors and senior civil servants on the public paybill.
"When you start with false assumptions, your results are equally flawed," said Dave Prentis, the general secretary of public sector union Unison.
"The idea that there is a public sector pay premium is a myth and dressing it up with dodgy statistics still won't make it true."
The new report draws on data produced by the independent Labour Force Survey for the first quarter of 2013.
Policy Exchange analysis found that t he average public sector worker enjoyed a 6.1% pay "premium" - £1,400 a year - over someone in the private sector, taking into account age, gender, region, qualifications, length of employment. and whether they were working full or part-time.
The report did not attempt to compare workers doing the same job in the public and private sectors.
In the North-East - excluding Tyne and Wear - the premium was 14.4% (£3,200), in Merseyside 14.1%, in the South-West 13.6% and in Strathclyde 12.4%, according to Policy Exchange.
But in central London, the East and South East, the average public sector worker was paid less than in the private sector.
The average "premium" had increased by 20% since 2007 and 8% since 2010, the report stated.
It recommended the abolition of national pay bargaining, under which workers are paid the same regardless of where they live.
Matthew Oakley, head of economics and social policy at Policy Exchange, said: "Nationalised pay negotiation is not fit for purpose for the modern public sector.
"It is bad for the economy and bad for public services.
"While the unions should still have a strong role in the future, we should move to a system where local public sector employers can decide how to negotiate salaries with employees in order to reflect the realities of their local labour market.
"At the same time as freeing up money for infrastructure and local growth projects, this will enable top-performing public sector workers to be paid more, increasing productivity and improving public services."
TUC general secretary Frances O'Grady said: "Cutting pay in those parts of the country sharing least in the much-delayed and rather shallow recovery makes no economic sense.
"It will make the North-South divide even greater.
"And it will make inequality within regions greater too, as the biggest losers from these proposals will be low-paid staff in the public sector who will suffer big pay cuts as their pay is pushed down towards the minimum wage.
"We should be spreading the living wage in both public and private sectors, not listening to these divisive and unfair proposals from well-off London thinktank wonks who never need to worry how to make ends meet each week."
Mr Prentis added: "It is risible to suggest that national pay bargaining has caused any pay gap, especially when public sector workers have had a three-year pay freeze and are suffering from a 1% pay squeeze.
"We know that hundreds and thousands of public sector workers earn the minimum wage or just above and that means real hardship for families struggling to pay their bills and put food on the table.
"Setting up workers in the private sector against those in the public is a nasty trick designed to cover up the impact of the Government's austerity agenda.
"The real pay difference is between those at the top and the bottom - the bankers and financiers who are still raking in the bonuses and dodging taxes at the expense of us all."