Private vs public sector pay: who really gets more?

The general consensus is that public sector pay is lower than in the private sector, but staff have better working conditions and job security. The reality is very different, says Merryn Somerset Webb.

I wrote earlier about the gold plated pensions our MPs and MSPs have and the way in which those pensions (and the regularly rising salaries that lead up to them) might prevent our leaders from really grasping the financial stress they are putting the rest of us under. 

But it isn’t just the public sector workers at the top of the tree that might be finding it hard to grasp just how tough it is in the private sector at the moment: the truth is that, across the board, public sector workers do better than private sector workers. 

In an article in the Sunday Times last week Dominic Lawson pointed to an ONS publication I missed when it came out – Public and Private Sector Earnings in the UK: 2019. This contains, says Lawson (and I agree), a “statistical marvel: the first time that the ONS has... arrived at a single number... to express the overall average differential in remuneration and benefits between the private and public sectors.” 

This “raw premium” was 7%. Yes you read that right. In 2019 if you had worked in the public sector you would have been on average 7% better off than if you had worked in the private sector. 

That premium was higher for lower-skilled workers than for higher: employees in lower-skilled occupations earned on average £13.62 an hour in the public sector and only £11.24 in the private sector. This goes against the accepted wisdom in the UK. 

Most people reckon that, if it is money you want, to go to the private sector. If it is job security and the warm feeling of general service you want, you go to the public sector – where lower salaries are compensated for by said security and service stuff. 

But if the public sector offers more money (largely thanks to the whopping pension entitlements almost everyone gets – 82% of public-sector employees get a defined-benefit pension) as well as more job security, where does that leave us? In a tricky situation. 

There’s been much talk about how the Covid crisis has exacerbated inequalities across the board in the UK; there has been little about how the main inequity in the UK is between the public and private sectors. Most public sector workers have no idea that this dynamic exists. Given the huge stresses on the public finances (financed by the private sector…) it would surely be better if they did.

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