PUBLIC SECTOR PAY
Criticism of public sector pay growth misplaced
"People cannot be in favour of the process of pay reform being carried out across the public sector and then throw up their hands in horror when this leads to higher pay growth." That is the main message to emerge from a detailed analysis of pay in the public services published by Incomes Data Services.
Recent months have seen widespread criticism of earnings growth in the public sector. The IDS analysis confirms that pay growth has been marginally faster in the public sector than in the private sector in the past few years, typically about 5% in the public sector against 4% in the private sector.
Upward pressures in the public sector
According to IDS, there are two key drivers behind this trend:
A further reason for the higher earnings growth has been privatisation and contracting out. This process largely involves lower-paid types of work being switched between sectors. So lower-paid jobs are moved into the private sector, leaving the higher-paid jobs in the public sector and apparently increasing earnings there -- this is known as a "compositional effect", says IDS.
Public sector pay premium
Does this mean there is now a pay premium for the public sector, as some commentators have alleged? According to IDS, such ideas are derived from a misunderstanding of the figures and of reality. If median earnings are used as the measure, the public sector is "ahead", but on the basis of average earnings levels the private sector is "ahead".
"Much more important is the fact that both the public and private sectors are made up of very different types of employees," says IDS.
The private sector has the largest numbers of both highly-paid employees and low-paid employees. The public sector has the largest numbers of professional women -- in teaching, healthcare, local government and the civil service.
A final word
'We are in the midst of the biggest pay reform agenda in the public services for more than a generation. That earnings growth in the public sector should run higher than the private sector should be expected. Those critical of this process should explain why they seem to be against the pay modernisation agenda." -- Alastair Hatchett, Head of IDS Pay Services.
Want to know more?
Title: "Public sector pay in 2005", IDS Pay Report 935, August 2005.
Availability: To order your copy contact customer services at Incomes Data Services in London, tel: 020 7324 2599.
IDS is a leading UK information and research service on employment issues, providing a range of publications for employers, unions, government departments and other agencies. To find out more visit www.incomesdata.co.uk
Posted 6 September 2005