Wednesday, July 08, 2009

More On Public Sector Pay

Public sector ahead for two decades

In the comments on yesterday's post DM Andy accused Tyler of cherry-picking his evidence on public sector pay, by only showing the last decade:
"That's a rather cherry picked graph there Tyler. The ONS data goes back to 1990 and shows the private sector started off lagging behind the public sector during the early 90s recession, the private sector moving into the lead in the boom years and now the public sector catching up again in another recession."

Now, Tyler can stand many things, but being accused of picking cherries is not one of them. So the above chart puts things right by showing the entire data period right back to 1990.

However, although the ONS average earnings indices show relative movement over time, they give no indication of relative earnings levels between the two sectors. So we've translated everything into cash terms (ie average full-time weekly earnings including bonuses) on the basis of the average earnings in April 2008 as recorded in the ONS's Annual Survey of Hours and Earnings (ASHE).

What do we conclude?

First, as Andy says, the public sector did pretty well in the early 90s recession. But then as the Major/Clarke golden decade got going, the private sector caught up, so that by the turn of the Millenium, it was roughly level pegging. Since then, the public sector has more than kept pace, latterly pulling strongly ahead again - just like in the last recession.

Second, for virtually the entire period, average full-time earnings in the public sector have been ahead of the private. The gap was highest in the early nineties, peaking at over 10% in 1992-93. Today, it is once again increasing (and on the median measure of pay it is even higher - at over 13%).

But what does this actually mean?

Well, that's when we get into all those apples and pears issues. For example, public sector unions (and Pol) argue that average public sector earnings have been artificially inflated by the privatisation of low-paid jobs such as cleaning. Others (such as HJ) point out that average public sector earnings are artifically deflated by excluding some high income groups like GPs, who are counted as being in the private sector even though the vast bulk of their pay comes from the NHS.

So these long-term trends do need to be treated with caution.

Nevertheless, the data certainly do not tell us the public sector has fallen behind in some way. If anything, they suggest the opposite.

Of course, we might be able to get a clearer fix by looking at the public/private comparison in more detail, for example by specific occupational group.

We don't have time to dig out all that data at present, but just as a taster, here's a chart on state teachers' pay relative to "other professional occupations" as recorded in ASHE. It's taken from the most recent report of the School Teachers’ Review Body:

As we can see, teachers pay is shy of the overall average for "professional occupations" (which you could easily argue is down to their holidays and final salary pensions). But over the last ten years, the percentage gap has been closing.

And the teachers illustrate something else we've blogged many times - the inefficency and unfairness of national pay scales. Whereas in London and the South East teachers might well argue they are underpaid, elsewhere - relative to local pay rates - they do very well:

So if you want to teach, go North or West. On no account choose London.

(Yet another reason for breaking up our huge national public service monoliths).

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