Public sector pensions again
(edited December 10th as the first draft read as if written in too much of a hurry – that’s because it was)
Mary Dejevsky has a piece in today’s Independent on public sector pensions. It’s much more thoughtful than the usual media attacks on public sector pensions as while she uses the language of pensions apartheid she concludes by attacking David Cameron’s comments that I blogged about ten days ago:
“Where he is wrong is in accepting that the system will have to be levelled down. Britain, for all the sobering vicissitudes of the past year, is a rich country. It is absurd that its private-sector middle class should face penury in retirement. Absurd, too, that something as crucial as pensions – anyone’s pensions – should be so dependent on the vagaries of the market. If the Conservatives cannot do better than this, they risk inheriting a private sector in terminal decline and a vocal class of pensioners so poor that their care-home fees will have to be met out of the depleted public purse.”
And if you want a flavour of just how hostile some on the right are to a decent retirement income for public sector workers, you should read the comments. Isn’t it a little strange that any left critique of inequality is dismissed as the politics of envy, but attacks on nurses’s pensions are not?
But Mary doesn’t look properly at the differences between public and private sector pay and pensions, perhaps because of her exclusive concern for middle class pensions (as if it were ok for the working class to face penury in retirement). Many of those who comment on her article get this completely wrong.
This is an issue where looking at means or medians simply won’t do. The difference between well-paid public servants and their private sector equivalents is quite different to that between the low-paid.
This is because the traditional claim that public sector workers are paid less than their public sector counterparts, but get a pension as part compensation, does not work for low paid jobs.
Low paid jobs in the public sector are slightly better paid than low paid jobs in the private sector. In addition very few low-paid private sector workers have any access to a pension scheme (as you see from chart 15 on page 49 of the PPI report (pdf) on public sector pensions).
This is down to a number of factors.
- Unions are good at organising low paid workers in the public sector where employers are at worst neutral and often encourage unions. This is not the case in most of the private sector (though there are exceptions such as Tesco who also offer a DB pension).
- Society generally expects the public sector not to exploit its workforce in the same way that Britain’s two million vulnerable workers face a grim life at the hands of some pretty apalling private sector employers.
So it is not true that low paid public sector workers get a pension to compensate for lower wages than they would get in the private sector. They get a decent pension and somewhat better pay because the public sector is a better employer. This is not to say that they are anything other than low paid or that they are going to retire into a life of luxury, simply that it is monstrous to demand that low paid workers in the public should be treated as badly as the lowest paid private sector workers.
It is a bit more complicated among better paid workers. The PPI use Office of Manpower Economics figures to show that among men (figures are not available in the same way for women) the highly skilled earn 5.5 per cent less in the public sector than they would in the private sector (controlling for occupation, education and other factors). In contrast (and in line with above findings for low paid workers) the unskilled earn 7.2 per cent more in the public sector than the private sector.
In other words highly skilled workers earn less and unskilled workers earn more in the public sector, as it has a flatter salary structure than the private sector (and a good thing too).
So it does look as if well paid public sector workers would get more pay in the private sector, and can legitimately see a decent pension as compensation for that.
But at the bottom end of the wage range public sector workers do better with pensions and with pay than their private sector counterparts because the public sector is a more just employer.
To leave with one further set of stats from the PPI report. Public sector men – who are more likely to work full time and in better paid jobs – are paid 2 per cent less in the public sector than the private. Public sector women – who are more likely to be lower skilled and have part time jobs – are paid a significant 4.7 per cent more than private sectior women.
This may indicate that the public sector not only has a flatter salary structure, but also has less gender discrimination in its pay (though I hasten to add that does not mean that it has been eliminated!)
I for one don’t mind paying a fair share of tax to ensure that the public sector treats its low paid and women workers better in pay and pensions than they would fare in the private sector.