From the TUC

A new and imaginary public/private split

18 Mar 2009, by in Public services

The Institute of Directors are always keen to stress that they do not just represent the well paid directors of Britain’s top firms. And of course there are many directors running small and medium companies who probably look  at the huge bonuses and pensions available in the biggest companies with the same mix of awe and outrage as the rest of us.

But the IoD have got stuck in an anti-public sector groove. Not content with continuing attacks on public sector pensions – where there is at least a difference between public and private sectors – they are now manufacturing a difference between wages. Somehow I imagine this is going to feature in tomorrow’s right wing newspapers.

Today the unemployment and average earnings figures came out. The jobless figures were depressingly predictable but the earnings figures jump off the page. This is how the Press Association reported it:

Other figures showed that average earnings increased by 1.8% in the year to January, the lowest since records began in 1991, while for the month of January alone wages fell by 0.2% – the first time this has ever happened.”

And this is how the Institute of Directors chief economist Graeme Leach responded:

“Today’s figures also show that average earnings growth in the public sector remains steady around 4% compared with just 1.4% in the private sector. In January alone, private sector earnings growth actually declined 1.1% year-on-year, including bonuses.”

It is hard to know how anyone who considers themselves a chief economist could say something so misleading. The truth is that the fall in private sector wages is almost entirely due to the collapse in bonuses. These are the ONS figures:

Annual Earnings Increase (AEI)  January (ie earnings growth in past 12 months)

  • All earnings including bonuses – 1.8%
  • All private sector earnings including bonuses – 1.4%
  • All earnings excluding bonuses – 3.5%
  • Private sector earnings excluding bonuses – 3.4%
  • Public sector earnings excluding bonuses – 3.8%

What is startling about these figures is just how much effect the collapse in bonuses has had across the economy. And if you take out the effect of bonuses, there is very little difference between the public sector and private sectors – 0.4 per cent to be precise. For much of the last few years when the government was trying to hold down public sector pay below inflation the difference was bigger and went the other way.

One Response to A new and imaginary public/private split

  1. Robert Day
    Mar 18th 2009, 11:15 pm

    As I never tire of saying, much of the headline increase in the total public sector paybill came from paying private sector wages (or as close as they could get) to tempt supposedly high-calibre managers into the public sector to shake us all up out of our torpid, feather-bedded ways. This has two effects:
    1) The money for this comes out of the pockets of rank-and-file staff because of budgetary constraints; and
    2) Private sector managers come into the public sector and start cutting corners. Next thing you know, data discs go missing when placed with private sector couriers and outsourced hospital receptionists start giving patients medical advice.