Digby Jones attacks public sector pensions
Former CBI boss and Trade Minister goat, Digby Jones, has attacked public sector pensions:
We are heading towards an apartheid,’ said Jones. ‘If we are not careful we are going to get an ever-decreasing private sector to pay the tax in order to have an inefficient public sector.
‘What will happen, fundamentally, is that it will come apart and we will get social division, which is not going to be very pleasant.’
Jones said that the traditional argument for better public sector pensions was that pay lagged behind that of the private sector – but median public sector pay was now £700 a year higher than in the private sector.
‘The public sector has caught up. So where is the logic for them to have a significantly better pension, which the private sector has to pay for?’ Jones asked. ‘It can’t go on. We can’t afford it.’
There are quite a few things wrong with this.
I suspect many will share my distaste at using the word apartheid in this context, as it trivialises the experience of generations of black South Africans. But we all say things we regret from time to time, so let’s not get too upset by this and look at the arguments used by Lord Jones.
Will we get social division? Well, we already do. There are two big gaps caused by pensions provision. First is the division between the boardroom pension bonanza and everyone else.
Second is the growing proportion of the workforce who are not building up any employer backed pension, which has gone from 54.6% in 2000 to 62.6% by 2008.
A significant cut in public sector pension benefits would make the first division worse and is irrelevant to the second, unless Lord Jones is proposing to end public sector pensions.
But what about the difference between public and private sector wages?
Opponents of public sector pensions make a big deal out of the higher average pay in the public sector. But there is nothing new about this. It was also true under the last government.
The table below, derived from ASHE but taken from here, shows median full time weekly pay since 1997. I’ve added the final column which shows how much bigger the public sector median is than the private sector one. The most noticeable thing about the final column is that although there is an upwards trend it is by no means constant, and is not very big.
ASHE figures only go back to 1997. I’m trying to get data back to 1970 when the New Earnings Survey started but it does not appear to be on-line.
|Median weekly pay – Gross (£) – For full-time employee jobs( 1) : United Kingdom|
|Private sector||Public sector||difference|
|(1) Employees on adult rates whose pay for the survey pay-period was not affected by absence.
(2) 2004 results excluding supplementary survey for comparison with 2003
(3) 2004 results including supplementary surveys designed to improve coverage of the survey (for more information see National Statistics website:
(4) 2006 results with methodology consistent with 2005
(5) 2006 results with methodology consistent with 2007
Source: Annual Survey of Hours and Earnings, Office for National Statistics.
These figures need to be treated with care. Jobs in the public sector are not the same as jobs in the private sector. These averages do not tell you whether you will get more money doing an identical job in the public or private sector, though the evidence suggests that the lower the pay the better it is to work in the public sector as, rightly, there are few minimum wage rubbish jobs in the public sector.
You also need to be careful looking at how the figures change over time. These figures do not tell you what the average pay increase was for public sector workers. This obviously will go up if people get a pay rise but it will also change if the make-up of the public sector workforce changes.
Many low paid and lower skilled jobs have been contracted out of the public sector into the private sector. This would make the average wage rise for the public sector as there are fewer low paid jobs keeping the average down.