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March 30, 2012 / politicsbitesize

National Pay Scales – public versus private

The public sector map of BritainThe newspapers this week have been concentrating on the ‘cash for access’ scandal, which broke after Peter Cruddas, co-treasurer to the Conservative Party, was filmed by undercover reporters from The Sunday Times offering dinner with the Prime Minister for a donation of £250,000. And, as though it were a surprise, results from a survey by Com-Res have been reported to show that there has been an increase in the belief that the Conservatives are a ‘party for the rich’! Surely this is nothing new: haven’t they always been a party for those with money? So, putting this non-new news aside, Politics:bitesize has decided to focus on the announced plan from last week’s Budget to scrap national pay scales for those working in the public sector.

But what exactly does this mean? In his Budget speech George Osborne outlined his proposal to seek to ensure that public sector pay is focused on regional rather than national pay scales. He stated: ‘We’re looking to see whether we can make public sector pay more responsive to local pay rates … We should see what we can do to make our public services more responsive, and help our private sector to grow and create jobs in all parts of the country.’ What the Chancellor is referring to here is the fact that public sector pay is set on a national basis whilst private sector jobs are regulated according to the regional labour market. In order to change this, the government plans to scrap national pay rates so that the pay of some public sector workers (such as civil servants and DVLA staff) will be brought into line with private sector wages in their regions.

According to a report from the Office of National Statistics, public sector workers were paid on average between 7.7% and 8.7% more than their private sector counterparts in 2011. The ONS claims the reason for this could be that those employed in some public sector jobs hold degrees or equivalent qualifications required by the industry, they enjoy better union representation and, therefore, better working conditions, and they are (or were) guaranteed superior pensions. This is not a new issue. A study in Fiscal Studies from 1998 by Richard Disney and Amanda Gosling claims:

On average, public sector workers are better paid than private sector workers. In 1994, for example, male hourly public sector earnings were about 14 per cent higher than male hourly private sector earnings (source: New Earnings Survey). Public sector wage rates are more likely to be set by unions, which are also likely to be able to achieve better working conditions for their members … Looking at simple measures of average pay, therefore, public sector workers in the past have had both better pay and better conditions than their private sector counterparts.’

Disney and Gosling’s study, Does it Pay to Work in the Public Sector, also highlighted the wage gap between men and women in both the private and public sectors. It concluded that although there was a pay differential of around 4% between men and women in the public sector, the inequality of pay within the private sector was even greater. This week union leaders have been voicing their concern over the impact that the localising of pay scales will have on women. The TUC’s response to the Office of Manpower Economics’ call ‘to submit evidence to inform the pay review bodies’ consideration of this question’ further confirms the inequality in private sector pay, as found in the 1998 study. The authors of the recent TUC report claim that the equal pay in the public sector has been negotiated so that the gap is minimal, whereas in the private sector the differential is much higher.

By proposing to level out pay by reducing the public sector wages to be in line with their lower paid private sector counterparts, the government is running the risk of seeing an increase in pay inequality. And it wasn’t that long ago that Nick Clegg, in his speech to Demos and the Open Society Foundation, called for greater transparency in income inequality. It would be good to see some consistency in the government’s objectives, but it seems that this will not be occurring anytime soon.


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