From the TUC

Why the ‘live fast, die young’ private sector should be more like the public sector

16 May 2009, by in Economics, Pensions & Investment, Public services, Society & Welfare

The Financial Times reports a study by PricewaterhouseCoopers that suggests male middle managers spending their working lives in the civil service will take home more money over their life times than similar middle managers in the financial services sector.  The conclusion that public sector workers’ wages and pensions should be cut because they are cossetted and too expensive for the economy to support, is utterly wrong.

The study shows that the civil servant gets a lower salary when at work, but doesn’t become unemployed in recessions, spends their 50s in employment rather than redundancy-enforced consultancy, and then gets a better (because final salary) pension.

I’m not sure the same differences would emerge if you looked at the poorest end of the sectors, where public servants DO get laid off in recessions as many are finding this year, or at the top end, where the top earners in the financial services sector receive hugely greater compensation than their public sector equivalents.

But it does show several things that are wrong with the way the private sector works.

First, public sector middle managers are treated considerably better by comparison with their seniors than in the private sector because of a more egalitarian distribution of rewards overall (this benefits the low paid, too). Even when well paid, middle managers in finance suffer from considerably larger differentials than in the civil service.

Second, public sector managers don’t suffer the blatant ageism that exists in the private sector, so don’t suffer the same decline in earnings as they get older (the PwC assumption that an average private sector manager will be forced out in their 50s doesn’t convey a positive image of the financial services sector – and I suspect the picture on this, on wages generally, and on pensions, would be even worse for women in the finance sector).

And third, the private sector’s abandonment of final salary schemes (for everyone below the top earners of course – they still get a huge wedge at the end of their careers, even if they’ve been catastrophically incompetent, as recent payoffs have shown) is a major mistake if you think people need to be encouraged with rewards for good performance, as the private sector is supposed to!

So, overall, the ‘live fast, die young’ approach of the finance sector is not all it’s cracked up to be. Maybe those finance sector middle managers would have been wiser to join a trade union and pursue a collective solution to their terms and conditions rather than assuming (against all the evidence) that their commitment to free market individualism would actually be rewarded.

The worst thing about the FT article, however, was its implication that the best way to make the private and public sectors more like each other is to slash and burn public sector achievements such as modest pay, decent pensions and basic egalitarianism. Why on earth isn’t the paper that is read by so many middle managers in finance arguing for them to have better terms and conditions?

2 Responses to Why the ‘live fast, die young’ private sector should be more like the public sector

  1. Nicholas King
    May 16th 2009, 7:02 pm

    Very interesting article, I have been working in the private sector for all my career, whilst my wife has worked in the public sector. Although we have very similar jobs within project management, its apparent that the public sector has many employees who are just there for the money or pension, this also makes her job alot more difficult.

  2. Robert Day
    Jun 6th 2009, 11:05 pm

    Nicolas – I’d love to know where these jobs in the public sector are – in thirty years, I’ve had to graft for every penny I’ve earned. Name the employer and the job, so we can all apply for these cushy numbers!

    I would challenge Owen’s assertion that male middle managers are better treated in the public sector, especially when it comes to ‘not suffering from blatant ageism’. My union branch’s study of my department’s pay awards as part of last year’s pay negotiations exposed the fact that the best awards were given to those under 35, and your liklihood of geting a ‘good’ pay award decreased rapidly after that age.

    Whenever a senior manager says “Staff are our most important asset” (and they still do this, much to my amusement), I always quote Dilbert back at them – “And like most assets, they lose value over time.” I’ve had management consultants think about this and then say, “Yes, that’s probably right.” And it happens in the public sector just as much. I’m currently defending a member who has been summarily dismissed on the most amazingly trumped-up charges I’ve ever heard (accused of ‘probably’ reading e-mails in a mailbox he was charged with administering to keep down junk mail, spam, firewall system notifications and the like). He is definitely in the ‘male, middle age, middle manager’ bracket, and I can’t help but think that he is being forced out in an exceptionally callous way partly because he doesn’t match someone’s image of a ‘professional’.