Public sector pay is actually lower than in the private sector

One of the regular media inquiries we get in the Bargaining and Campaigns Team is how we can justify higher wages in the public sector compared with the private sector. This ritual is usually played out when the ONS publish headline pay data that appears to show just that. I am also pre-empting similar arguments used by the Chancellor in justifying his pay policy in today’s budget.

Our response is usually, we are not comparing like with like, similar to my July 2011 briefing in response to an ONS paper and goes as follows:

• The figures exclude other benefits such as bonuses and other perks that are more prevalent in the private sector. The research is based on snapshot in April after the Jan-March bonus season.
• They exclude the self-employed.
• These are UK figures and in England many lower skilled and paid jobs have been outsourced to the private sector.
• The average age of public sector workers is higher and older workers are paid more.
• Public sector workers tend to have higher qualifications. In 2010, some 38% of workers had a degree or equivalent qualification in the public sector, compared with 23% in the private sector. Comparing the pay of these graduates flips the pay gap around, with public sector workers earning 5.7% less than those in the private sector.
• The key to the difference in pay is the higher proportion of higher-paid jobs in the public sector.
• Also within the two sectors, the gap between the highest earners - in the top 5% - and the lowest 5% of earners is greater in the private sector than in the public sector. This shows that public sector pay is fairer than the private sector.

Helpfully, you don’t have to take our word for this today. There is an interesting analysis of pay data by Professor Graham Cookson in ‘The Conversation’ hard evidence series. He makes similar arguments and adds the impact of working for large organisations that tend to pay higher wages. The public sector workforce is concentrated in larger organisations.

He concludes: “So who earns more? What is clear is that personal and job characteristics are far more important than whether you work in the public or private sector. Yet having controlled for all of these factors, the evidence points towards a small pay gap in favour of the private sector.”

So if you get any calls on this issue today – answers as above.