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