From the TUC

It’s public v private pay again …

15 Sep 2010, by in Labour market, Public services

The Daily Mail splashes with that golden oldie:

The great public, private pay gulf:

State workers get £136 a week more than private employees in pay and pensions

This is based on some new figures (pdf) from ONS that compare what they call total reward in the public and private sectors.  This is an exercise that looks at both pay and the value of the pension that people are building up – both today’s and tomorrow’s pay if you like – but while that sounds interesting I don’t think that the detailed figures mean a great deal.

As ever from the Mail and other papers we get a crude comparison of the median figure for pay and reward in the two sectors.

It is hardly surprising that the public sector ends up higher.

First let’s look at the pay element. The public sector employs a much more skilled workforce than the private sector, with a much higher share of graduate and profesional workers than the private sector. While some people in the public sector are on low pay, it is largely free of the minimum wage, maximum exploitation jobs that disfigure the private sector.

These trends have been intensifying. Low-paid lower skill jobs have continued to be contracted out of the public sector, while the big growth in the public sector under the last government  was in more skilled jobs particularly nurses, teaching assistants, teachers, doctors and police officers. (And one further complication is the staff of the semi-nationalised banks who are now counted as public sector employees.)

Second let’s examine the pension part of the reward package. There is of course a huge gap between pensions provision in the private and public sector. As the TUC often says, there has been an astonishing collapse in private sector pension provision in the private sector. Two out of three private sector staff get no pension contributions from their employer. Even if public sector pensions were reduced to a fraction of their current value, there would still be a big gap, simply because there always will be a divide between nothing and something.

The best way to understand the difference between public and private sectors is to seperate these two factors.

  • As I have said above, the composition of the two sectors is different. Even if everyone was paid the same rate for doing the same job, irrespective of which sector it fell in,  the public sector would have higher average pay.
  • The public sector has fairer pay structures. The gap between top and bottom and between men and women is smaller in the public sector than the private sector.

As jobs are not identical in the two sectors, it is impossible to say in which sector someone doing a particular job would be better paid. That is why we have looked at pay rates for different skills. For example graduate staff in the public sector are paid less than those in the private sector (3.4 per cent in 2009).

The novel aspect of today’s ONS report is their attempt to include the value of pensions in their figures:

Looking only at those full-timers with pension contributions, a different picture emerges – median total reward in the private sector is higher, at £666 a week compared with £644 for those in the public sector.

But much as it is good to see some figures in which the private sector do better than the public sector as they go against Daily Mail common sense, this is another compositional effect. In the public sector even the low paid get pensions. In the private sector, the minority who get a pension are much more likely to be well-paid so you end up comparing a public group that include a lot of low paid staff with a private sector one that excludes the vast bulk of the low paid.

That may well change when auto-enrolment starts, but for now the figures tell you more about pension coverage than reward.