Tomorrow, just ahead of the parliamentary recess, public sector pay review bodies will report to the chancellor the results of their consultation and deliberations concerning the introduction of localised or regionalised public sector pay. This issue was put on the table by the Chancellor who suggested that public sector pay ought to be more ‘market facing’, more reflective of local market conditions.
The theory presented by the Chancellor was that workers were choosing to opt in to public sector employment instead of private sector jobs, based on higher pay and better terms and conditions of employment, essentially ‘crowding out’ private sector growth and retarding economic growth.
The TUC has consistently disagreed with this analysis and suggested that capping public sector pay in regions like the north east, where the relatively weak private sector leads to a higher dependence on public sector jobs to sustain economic activity, would have both a short and long term negative effect on the region and would further impact on the quality of public services in years to come.
A report published today by the New Economics Foundation, commissioned by the TUC, challenges the analysis presented by the Chancellor and, furthermore, presents a damning critique of the policy, suggesting it could cost the UK economy as much as £10billion, 0.43 of the country’s current GDP, and, rather than creating jobs, could actually see a further fall of over 110,000 jobs.
The report completely smashes the notion that there is a public sector pay ‘premium’. The occupational and pay structures between the private sector and the public sector are barely comparable. It may make for an interesting political sound-bite to compare the salary of a paramedic with the wages of a retail store manager, but the reality is this is like comparing apples and a bicycle chain – there is no comparison.
Even at times of high employment, which we haven’t enjoyed for a considerable time, there was never any real or meaningful evidence the private sector were being crowded out by overly attractive public sector employment. This claim is even more bogus when there are around 20,000 jobs per month going in the public sector. The principle difficulty that private sector companies are expressing regarding recruitment is the availability of workers with the right skills; public sector competition for workers isn’t even on the radar.
Finally, the assumption that localising pay is ‘what the private sector does’ is not based on any evidence either. Many companies have a London weighting, but most companies, in fact, have one national set of terms and conditions that are applied throughout the UK.
In short, none of the analysis presented by the chancellor for considering regionalisation of public sector pay stands up to scrutiny. What is of greater concern, perhaps, is not just the fact that none of this adds up, but what it takes away; £10billion and 110 thousand jobs. Clearly this idea needs to be binned.