Friday, 14 October 2011

The truth about public and private sector pay

A common attack on public sector workers is that they get paid more than those doing private sector jobs. Sometimes critics go further and talk as if this is something new, implying that public sector workers have overtaken private sector workers.

And if they are paid more, the critics say, then it’s unfair that they should get a decent pension on top of this.

So what’s the truth?The raw statistics show that average pay in the public sector is higher than it is is in the private sector.

But that’s because the the two sectors employ different kinds of workers.

Many jobs in the public sector are skilled professional jobs or others with comparatively good pay. The last government took on 44,000 extra doctors, 55,000 extra police officers and 38,000 teachers. These are all jobs where you earn above average pay.

At the other end of the pay scale the public sector has been contracting out low paid jobs -such as cleaners – for many years.

Let’s look at what this means for average pay. Even if everybody’s pay is frozen, if you add better paid workers and take away low paid jobs the average will go up, however you measure it. It doesn’t mean that anyone has had a pay rise.

If you look at the private sector there are very many jobs that are low paid. Many jobs in the restaurants, pubs, hotels and other jobs that make up the hospitality sector are minimum wage jobs. The same goes for shops. At the other end are the real fat-cats with huge pay-packets.

So comparing averages between the two sectors tells you more about what type of jobs are in each sector than anything very useful about pay.

If you want to make a proper comparison between the public and private sector, then you need to compare people doing exactly the same job.

But there aren’t many jobs that are done the same way in both sectors so this doesn’t work as a way of comparing the whole of the public sector with the whole of the private sector.

The best we can do is compare what people with the same qualifications earn. This is because people who have GCSEs are likely to be doing jobs with the same skill level wherever they work, just as graduates are likely to be doing better paid and higher skilled jobs wherever they find work.

This is where it gets interesting.

The truth is that people with high levels of qualification tend to earn more in the private sector, while those with lower qualifications tend to earn more in the public sector.

The TUC last looked at this in 2009 – and we hope to return to this issue before November 30. What the figures show is that those with a degree earned 3.4 per cent less in the public sector, while those with no formal qualifications earned 3.7 per cent more in the public sector.

That is not perhaps that surprising. There are certainly people with low pay in the public sector, but they tend to get more than the minimum wage because they have unions to represent them and the public sector does not have the really vulnerable exploitative jobs that disfigure parts of the private sector.

At the top end, the public sector has some very well-paid people, but their pay is nothing like the stratospheric levels reached by the real fat-cats in the private sector.

The figures also show that the public sector has been getting more qualified. In 1998 25% of the public sector workforce were graduates, by 2009 this had risen to 38.5%.

Many would say that the public sector is a fairer employer as the gap between the best and worst paid is smaller than in the private sector . If you take the figures apart in another way you find the gap between men and women is smaller in the public sector too. That is not to say it is perfect of course, but fairer than the private sector as a whole.

The independent Institute for Fical Studies has said:

"Overall, pay levels in the public sector are probably not significantly out of line with those of similar workers in the private sector, once you take into account factors such as their age, education and qualifications.”

So let’s set out two ‘truths’ about pay.

1.Average pay is higher in the public sector because it employs a much higher proportion of highly skilled people doing jobs that anyone would expect to be relatively well paid.
2.But those highly skilled people on average earn a little less than they might in the private sector, while people in jobs that do not require qualifications get treated a little better in the public sector.
And we can add a further truth. There is nothing new about this.

Pay in the public sector tends to get held back and then catch up. But if we compare the median full time weekly wage in public and private sectors the median has been higher in the public sector every year since 1984. It’s got nothing to do with the last government, it is simply a reflection of the different kind of jobs that there are in the public sector.

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