‘Public sector pay rising more than in the private sector’ – report

Public sector workers are still paid more than there private sector counterparts and the gap is widening, according to right-wing think tank Policy Exchange. 

Public sector workers are still paid more than there private sector counterparts and the gap is widening, according to right-wing think tank Policy Exchange. 

It says its study, which uses statistics up to December 2010, shows that the public sector ‘premium’ – the additional pay a typical public sector worker receives over a private sector worker – is now up to 35% calculated on hourly pay. For typical annual pay the premium is up to 16%.

This new research updates previous work from Policy Exchange which showed that 2009 was the first year in which average pay for public sector workers as a whole was now on average higher than for all private sector workers.

Policy Exchange says public sector pay premiums rose in every part of the earnings distribution in 2010 apart from for at the top – the top 10% of earners in the private sector saw their income rise more than those in the public sector. Pay shrank (even in cash terms) for the bottom 30% of private sector workers.

It says the public sector pay gap continued to increase up to December 2010 in spite of pay freezes. "This is true," it says, "when you consider the gap between the typical (median) hourly pay of a public and private sector worker, and also when accounting for differences in the composition of the workforces."

The think tank calculates that public sector incomes have grown at double the rate of the private sector since 2002.

Since the start of the recession, it says, the hourly pay premium for the typical public sector worker has increased. After taking into account differences like age, experience and qualifications, the hourly pay premium for a public sector worker was 8.8% as of December 2010. This almost doubled from 4.3% two years earlier.

Policy Exchange director Neil O’Brien said the figures showed that the big public sector unions were risking their members’ jobs by continuing to push for big pay increases.

He said: "Public sector pay has got hugely out of control. There is pressure on budgets like never before because of the deficit. If the unions want to preserve their members’ jobs they have to realise that pay is an issue which will have to be looked at.

"This is an issue of fairness. It is unreasonable and unfair to expect private sector workers to make all the sacrifices. We need a much better-balanced system of public pay, with organisations like the NHS and schools given greater freedom to vary pay so they can attract staff but also get value for the taxpayer."

The think tank recommends local pay bargaining, an end to national strike ballots, a freeze on the total pay bill for public sector organisations and pension reforms for the public sector.

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