Earnings gap between public and private sector widens
The difference in average levels of pay between public and private sector workers has increased.
A new report from the Office for National Statistics (ONS) reveals that in April 2010 public sector employees were paid 7.8 per cent more on average than employees in the private sector. The gap has widened since the financial crisis and the credit crunch began. In 2007, the year before the recession began the gap was 5.3 per cent.
The ONS report rays that one reason for the increased gap is that many lower skilled public sector jobs have been taken on by the private sector. Additional benefits such as pensions and bonuses are not included in the figures and could impact the overall remuneration costs.
It remains to be seen if this gap will begin to close following the government spending review in October 2010 that announced that nearly 500,000 public sector employees will lose their jobs and the recent proposed changes to public sector pensions.
However, another factor that could have increased the level is the reduced pay settlements that employees in the private sector have received since 2007. During that time, especially from 2008 onwards, unemployment has risen overall and fears over job security have led to low wage settlements in the private sector. Self employed people were not included in the data.
One other factor that is likely to have influenced the higher levels of pay in the public sector is that most public sector workers were older and a higher proportion had received a degree level education, 38 per cent of public sector employees against just 23 per cent in the private sector.
However, the gap between the highest paid members of each type of workforce is wider in the private sector. The top five per cent of earners in the private sector earns on average about 5.6 more than the bottom five per cent of earners in the private sector. For public sector employees the ratio is 4.6.
The report could be used as evidence that public sector pay levels are too high and will be linked to the arguments over public sector pensions as well. However, the ONS said the key to higher levels of pay were the higher proportion of senior and better paid jobs in the public sector.
TUC general secretary Brendan Barber said: “This survey confirms that the simple comparisons between public and private sector pay favoured by some commentators are completely misleading, as most of them know. What the figures show is that the public sector is fairer than the private sector.”
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