Merryn's Blog

How to cut the deficit without cutting jobs

The government doesn't need to sack vast numbers of overpaid public sector workers. They could just pay them less.

There was much fuss in the papers yesterday at the news that the average public sector worker is paid much more than the average private sector worker. Turns out that median gross pay for them is £539 a week. Chuck in their pensions and so on and they get total compensation of £615. And the rest of us? We make a median average income every week of only £479.

That's incredibly irritating (it adds up to over £7,000 a year less) but it is even more so if you look at some of the numbers behind the front line figures. As Damien Reece points out in The Telegraph, in the three months to February, private sector pay rose 1.8% on the previous year. In the public sector, with no justification whatsoever, it rose 3.7%.

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I say "with no justification" because it is often thought that rising real wages should reflect some kind of rise in productivity. But these ones didn't. "In recent years, private sector productivity has risen 20% while public sector productivity has fallen 3%." Reece is not impressed. "It can't be justified," he says, "that 23m private sector workers subject to cuts and savings, are supporting 6m public sector workers who are refusing that same medicine while enjoying superior job security, pay and pensions. If anyone should be protesting and calling for a campaign of civil disobedience it's us in the private sector."

Quite. But the fact that public sector wages are quite this high adds- to me at least- even more to the mystery of why, instead of making hordes of people redundant in the coming rounds of cuts (which is not only expensive in itself, but also bumps up the welfare bill), we aren't just paying them a little less.

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If we only cut the average public sector compensation down to the level of the average private compensation we'd be saving a deficit busting fortune immediately (around £42bn £7,000 a year, on average, times 6m workers). And this surely wouldn't be that hard to do.

The inclination of the top level bureaucrats would, naturally, be to cut the pay of the lowest paid first. But as I have said before, it would be more straightforward (and fairer) to cut from the top down. You could cut all salaries above £150,000 back to £150,000. Then take 15% off everyone earning over £120,000, 10% off everyone earning over £90,000 and so on. Or something like that. I'm sure George Osborne can do the numbers. And that would be that. Job done.

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