Unison said high inflation, coupled with a three-year wage freeze, means that since 2009, council workers' pay has fallen by 13% and will slide by a further 2% by April.
Low-paid local government employees are now in a financially "precarious" position, said Unison, which pointed out that the lowest pay rate has been "stuck" at £6.30 an hour for nearly four years, just above the national minimum wage.
Unions have claimed that most employers have refused to honour Chancellor George Osborne's pledge to pay a £250 increase to all public-sector workers earning less than £21,000.
Heather Wakefield, Unison's head of local government, said: "We know how tough finances are for councils - they have been singled out by the Tory-led coalition for its harshest cuts.
"But councillors need to know how tough things are for the people working harder than ever to keep local government services running.
"Wages have been driven down by rising prices and it is not only those on the lowest pay who are struggling. Middle earners are also facing sleepless nights over how to keep food on the table.
"Giving workers a decent rise would also help to stimulate local economies.
"They need spending now more than ever before as the threat of the triple-dip recession looms large."
Unions are currently in talks with local government employers over pay for the coming year.