Jeremy Corbyn has accused the Government of "recklessly exploiting the goodwill" of public sector workers as he warned of a "low pay epidemic".
The Labour leader insisted people "need a pay rise" given rising inflation, using Prime Minister's Questions to attack the Government's approach.
Theresa May said her party inherited the "biggest deficit" in the UK's peacetime history from Labour, prompting shouts of "apologise" from Tory backbenchers at the Opposition.
Mrs May also pointed to the struggles of Greece and said Labour's suggested approach means "everyone pays the price".
Mr Corbyn said there had been a "week of flipflopping and floundering" by the Government over the public sector pay cap, arguing the 1% limit causes "real shortages" in nursing, teaching and other professions, as well as "real hardship".
He quoted a teacher called David who warned his workload has increased and more people are leaving the profession than starting.
MPs heard the teacher added: "The only thing holding the education system together is the dedication to struggle on for their students and staff."
Mr Corbyn went on: "He says 'this dedication is starting to run out'.
"So what we're doing by this pay cut, if I say to the Prime Minister, is recklessly exploiting the goodwill of public servants like David.
"They need a pay rise."
Mrs May claimed there are more nurses and teachers compared with 2010, adding of the need to limit pay for public sector workers: "We inherited the biggest deficit in our peacetime history."
Speaker John Bercow intervened to calm MPs, before the PM defended the Government's economic record.
She also said: "Our policy on public sector pay has always recognised that we need to balance the need to be fair to public sector workers, to protect jobs in the public sector and to be fair to those who pay for it.
"That is the balance we need to strike and we continue to assess that balance."
Mr Corbyn questioned how Mrs May could find £1 billion for Northern Ireland "to keep her own job" via a deal for her minority Government to receive DUP support, adding: "Why can't you find the same amount of money to keep nurses and teachers in their job - who, after all, serve all of us?"
Mrs May, in her reply, said: "I understand it has been hard for people who have been making sacrifices over the years as we've been dealing with Labour's mismanagement of the economy."
Pointing to the experiences of other countries, Mrs May said: "In Greece ... what did we see with failure to deal with the deficit?
"Spending on the health service cut by 36%. That doesn't help nurses or patients."
Mr Corbyn widened the issue of pay concerns beyond the public sector, noting wages across the economy are increasing at 2.1% while inflation is nearly 3%.
Mr Bercow had to intervene a second time after Tory MPs shouted over Mr Corbyn when he told the Commons Mrs May "simply doesn't get it".
The Speaker said: "People who are making an excessive noise should try to calm themselves and perhaps give a moment's thought to whether they would like to be viewed by their constituents shrieking their heads off.
"It's very downmarket."
Mr Corbyn added: "There is a low pay epidemic in this country, and it has a terrible effect on young people."
He said this includes it being harder for them to buy a house, a higher chance of them having debts and taking on insecure, low-paid jobs.
Mr Corbyn asked: "Except for more misery, what does the Prime Minister and her Government actually offer for the young people of this country?"
Tory MPs could be heard shouting "jobs", with Mrs May adding: "What we offer young people is more jobs, an opportunity to own their own home."
The PM said it is not fair to "refuse to take tough decisions and load debts on our children and grandchildren".
Mrs May went on: "It isn't fair to go out and tell people that they can have all the public spending they want without paying for it.
"Labour's way leads to fewer jobs, higher prices, more taxes, and Labour's way means everyone pays the price of Labour."
Mr Corbyn finished by urging Mrs May to make "tough choices", adding: "Instead of offering platitudes, offer some real help and real support for those in work, young people who deserve better and deserve to be given more optimism than greater inequality."
Mrs May defended help given to low-paid workers by the Government, telling MPs: "I know (Mr Corbyn) has taken to calling himself a government in waiting.
"Well, we all know that means - waiting to put up taxes, waiting to destroy jobs, waiting to bankrupt our country. We will never let it happen."
A senior Labour spokesman later dismissed Mrs May's comparison with Greece as "preposterous".
"The situation in Greece is tied up with the eurozone and the management of the eurozone and eurozone banks," said the spokesman.
"We are not remotely in that situation.
"Our manifesto and our pledges were costed, unlike the Government's, and the Institute for Fiscal Studies said at the end of the Parliament if Labour's plans were implemented we would more than balance the books on current spending."
But asked whether Mrs May really thought Britain faced the same fate as Greece if it failed to control its deficit, a senior Conservative source said: "She was suggesting that if Jeremy Corbyn and the Labour Party had the chance to impose his fiscal policies on the UK, that is a very real threat."