Don't believe the sob stories about public sector pay

 Working for the state is far more lucrative than a job in private industry

Source - Daily telegraph -  21/08/22

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UK public sector wages lagging behind the private sector”. “Public sector workers are clearly worse off”.

Last week, when the Office for National Statistics released the latest wage data, countless newspaper headlines and broadcast bulletins suggested that public sector workers are, on average, paid less than the rest of us.

The clear implication was that the fifth of the workforce employed by the state deserves a particularly large wage increase, more than anyone else.

Such media commentary matters given that millions of public sector workers will likely vote on strikes this coming autumn, in what could be the biggest wave of industrial action since the 1970s. Many state employees feel their poor pay justifies walking out, whatever the suffering and chaos that imposes on the rest of us.

Public sector shutdowns could impact schools, hospitals and fire stations, among other vital services, adding to ongoing stoppages across our transport network, if pay disputes cannot be resolved.

Those who dismiss a repeat of 1970s-style widespread strike action argue that trade unions are now less powerful, with membership having fallen from around half to about a fifth of the total workforce.

But while overall trade union membership is down, more than 50pc of public sector workers remain unionised. And union leaders across some of the most vital services, not least health and education, are increasingly militant, their rhetoric becoming more strident.

As summer draws to a close and temperatures begin to drop, we face the prospect of spiralling household utility bills intensifying the cost of living crisis – not least when a new, much higher Ofgem energy price cap kicks in during October, before being revised upward again in January.

At the start of this year, that cap on average household utility bills was £1,277 per annum. Trends in wholesale gas prices suggest average bills could hit an astonishing £4,200 by early 2023 – a more than threefold increase in just twelve months. And that’s without the Kremlin imposing a full shutdown of Russian gas exports to Western Europe – which is by no means out of the question.

And businesses, of course, from pubs to steel works, will endure even steeper rises, given the lack of a corporate energy price cap. After the trauma of lockdown, then soaring supply chain inflation, for many businesses a four- or five-fold rise in their energy bill could be the final straw.

As the domestic political atmosphere worsens in the coming months, public sector unions bosses – keen to humiliate a new Conservative Prime Minister – could really turn the screw. An upcoming “autumn of anger”, as households and firms are squeezed, would then become a modern-day “winter of discontent” that could even topple the Government. I’m not saying it will happen – but it could.

For now, public sector unions complain loudly that initial pay offers, many due to be formalised by ministers over the coming months, aren’t keeping pace with inflation – and they’re right. Across the entire economy, in fact, wages are falling at their fastest pace for at least two decades, according to last week’s data.

Actual pay – in terms of pounds and pence – is up sharply, almost five percent on average over the last year, in the steepest pay growth since 2007. But once you consider inflation, real wages – reflecting what people can actually buy – are 3pc per cent lower than in 2021, the fastest drop on record.

Much was made of the fact that, while private sector wages grew 5.9pc over the last year on average, public sector wages rose just 1.8pc. This fact, displayed prominently in the ONS press release, drove countless articles and commentaries suggesting public sector workers are worse off.

But it’s simply not true. Public sector workers are still being paid more on average than private sector workers and have been for decades. The average weekly public sector wage in 2021 was £579, according to the ONS, but just £536 in the private sector – with state workers’ wages around 8pc higher. I’m astonished this reality is so rarely commented upon

On top of that, public sector workers are generally entitled to far more holiday and sick leave, to say nothing of much better job security. They also often enjoy hugely generous final salary pension benefits and earlier retirement – paid for by the rest of us. Such occupational pensions have all but disappeared for those taking private sector jobs.

Some argue higher public sector pay is explained by “worker characteristics”, given that state employees are more likely to have degrees. But even allowing for that, numerous studies show the public sector still pays significantly more.

What’s more, the average private sector wage - even though it’s lower that in the public sector - is pulled upward by the reality that a lucky few in the private sector receive enormous pay packets. So the average is skewed higher, with those near the bottom of the private income scale even further behind their public sector counterparts than the comparative averages suggest.

Now public sector pay was frozen from 2011-13, with annual rises then capped at a 1pc until 2018. As such, the difference between public and private-sector pay has narrowed since 2011, from around 15pc to today’s 8pc. But public sector wages remain significantly higher even before you consider all the additional benefits of working for the state.

On top of that, during lockdown, public sector employees weren’t furloughed – so they stayed on full wages, knowing their jobs were safe. Millions of private sector workers, in contrast, saw their pay drop by a fifth in furlough, while millions more – not least the self-employed army who keep our economy moving – lost almost all their wages, while receiving no state support.

Now don’t get me wrong – NHS nurses and other hard-working front-line state workers deserve a decent pay rise. But NHS managers, GPs doing few face-to-face consultations, and others in cushy civil service jobs, now working mostly from home? I think not.

This autumn and winter, as the cost-of-living crisis bites, public sector union bosses pushing for inflation-busting pay rises will appeal to the broader public for sympathy.

But remember – public sector workers are, on average, already better off than the rest of us. And it’s the rest of us generating the taxes that pay for everything they get.