The gap in average hourly earnings between public and private sector workers increased to 8.2% in 2011 – the highest level for 10 years – despite the coalition government’s efforts to squeeze public sector pay, official figures reveal.
Analysis by the Office for National Statistics shows that the gap increased by 0.4% from 2010. The estimated gap would be even wider – about 9.3% – but for the ONS’s decision to categorise employees of nationalised banks as though they were still in the private sector. Before the recession, in 2007, the gap in earnings stood at 5.3%.
In 2011, chancellor George Osborne announced plans to cap public sector pay rises at 1% a year for two years from 2013, on the back of a two-year pay freeze.
In last week’s budget, he also outlined proposals to lower salaries for public sector workers in poorer parts of the countries, a move condemned as “grotesque” by unions.
The TUC’s general secretary, Brendan Barber, said: “It’s not public sector pay rates that are stopping the private sector from creating jobs. It’s our stagnating economy, a lack of lending by the banks for firms to invest, and consumers who are too worried about losing their jobs to spend – that’s the real reason businesses lack the confidence to grow.”
Emphasising several difficulties in accurately comparing public and private sector pay, it pointed out that a higher proportion of public sector workers (40%) were educated to degree standard compared with 25% in the private sector.
“Since the public sector is made up of a more skilled workforce than the private sector it would be expected that, on average, public sector pay would be higher than private sector pay,” the report stated. Overall, 59% of public sector employees are classed as either high skill or upper-middle skill compared with 49% of private sector employees.
Barber pointed out that the figures showed graduates tended to earn more in the private sector, whereas people with lower skill levels have slightly higher salaries if they work in the public sector.
“Should the government’s ill-thought out proposals on local pay begin to take shape, the real losers would be the thousands of home helps, bin men and dinner ladies – workers who are already low paid – and the communities in which they live,” Barber said.
“By setting pay nationally across the public sector, hundreds of thousands of lower-paid workers – many of them women – have been able to enjoy decent rates of pay. The introduction of local pay would change this, condemning them to a future of permanent poverty, and where pay inequality becomes the norm as the gender gap widens to mirror the huge salary divide between men and women in the private sector.”
Neil Carberry, director for employment at business lobby group the CBI, disagreed. “It is clear that public sector pay is still considerably higher than pay in the private sector,” he said. “We need to ensure that public sector salaries reflect local labour market conditions, by putting pay decisions into the hands of individual employers at the local level.”
The ONS analysis, based on data from the Annual Survey of Hours and Earnings and the Labour Force Survey, does not include other factors that could influence the pay difference such as bonuses, pension contributions, company cars and health insurance. Nor does it contain earnings data for the self-employed, therefore excluding some of the country’s highest- and lowest-paid workers.
The gap between the highest and lowest paid is more pronounced in the private sector, with the top 5% of private sector earners paid around 5.7 times more than the lowest 5%. In the public sector the gap is 4.5 times.
Last week, Office for Budget Responsibility (OBR) figures showed thatone in seven public services jobs will eventually be culled. The Chartered Institute of Personnel and Development’s chief economic adviser, John Philpott, said it would take the public sector workforce to a record low.
“The public sector will eventually account for only 1 in 6 jobs in the UK economy, down from a peak of 1 in 5 prior to the recession,” Philpott said.
“While the OBR expects growth in private sector jobs to more than make up for the public sector jobs cull, public sector downsizing on such a scale nonetheless represents a tectonic shift in the underlying structure of the labour market with broader implications for what people can expect to experience in terms of pay, conditions of work, management practice and workplace cultures.”
This article first appeared in The Guardian Online and can be viewed here