PUBLIC SECTOR
Estimating the public-private pay gap: analysis by Office for National Statistics
An analysis of the public-private pay gap by the Office for National Statistics concludes that different methods of comparing wages in the two sectors give very different results and there is no definitive estimate.
Drawing on data from the Annual Survey of Hours and Earnings (ASHE) and simply comparing mean gross hourly earnings excluding overtime, public sector workers earned on average 14.9% more than private sector workers in 2011. But ONS warns: “Using simple averages to compare earnings between the two sectors is often misleading as employees have different personal characteristics that can impact on their pay.”
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So the ONS used regression analysis to take into account differences between the public and private sectors in terms of gender, age, occupation, region, full-time/part time and so on. This produced a much smaller wage gap:
The public sector earned 7.3% more per hour (excluding overtime) than the private sector in 2011. As this is an estimate it is subject to a margin of error such that there is 95% certainty that from all samples possible the pay gap in 2011 would be between 6.8% and 7.8%.
However, another important factor is size of organisation – broadly speaking, large employers pay more on average than smaller ones. This is important as public sector employees tend to be concentrated in large organisations compared with their private sector counterparts. Once again, this modelling resulted in a much reduced wage gap:
Adding organisation size into the model, in addition to accounting for the personal and job characteristics discussed above results in an estimated pay gap of 2.2%. A 95% confidence interval for this estimate indicates that the pay gap in 2011 would be between 1.7% and 2.7%.
Another striking finding to emerge from the ONS is that differences in public-private sector pay tend to be in favour of the public sector for low-paid workers and in favour of the private sector for high-paid workers:
For the UK, using the model excluding organisation size, for the lowest earners at the 5th percentile (the point at which 5% of employees earn less and 95% earn more) public sector employees earned 15.1% more than private sector employees in 2011. At the 95th percentile, public sector workers earned 5.5% less than private sector workers.
Using the model including organisation size, at the 5th percentile, public sector employees earned 11.2% more than private sector employees in 2011. At the 95th percentile, public sector workers earned 10.3% less than private sector workers.
This indicates that the overall estimated pay gaps of 7.3% (excluding organisation size) and 2.2% (including organisation size) are heavily influenced by those at the lower end of the pay distribution. This is likely to be due to the private sector having more jobs paid close to the minimum wage at the bottom of the pay distribution and having very high wages at the top of the wage distribution.
The ONS analysis does not take account of differences in qualifications, as this information is not collected by ASHE.
Want to know more?
Title: Estimating Differences in Public and Private Sector Pay at the National and Regional Level, Office for National Statistics, November 2012.
Availability: You can download the 52-page report in PDF format on the ONS web site.