The government's planned spending squeeze will throw 750,000 public sector workers on to the dole queue and push unemployment close to 3 million for the first time since the early 1990s, a respected thinktank warns today.

In a stark assessment of the human impact of the cuts the coalition says are required to tackle the ballooning deficit, the Chartered Institute of Personnel and Development, says unemployment will rise to a peak of 2.95 million in the second half of 2012 and remain near that level until 2015, the entire period of the coalition government.

It also warns: "There is little prospect of real wage growth on average throughout this period and ongoing real wage cuts in the public sector."

The warning by the CIPD, not seen as a party political thinktank, underlines the dilemma faced by the government as its efforts to cut the deficit may lead to higher unemployment and then a higher benefits bill. The government this week for the first time signalled that its spending review would extend to the level of welfare benefits and the range of people entitled to receive them.