Public sector workers receive better pay and pension benefits, as well as shorter working hours and earlier retirement than private sector staff.
According to analysis by think-tank the Policy Exchange, on an hourly basis, the typical public sector worker is now 30% better paid than the typical worker in the private sector. On top of this, public sector employees have better pensions. The difference is worth an extra 15% of their salary.
Over their lifetimes, people in the private sector work 23% more hours (equivalent to 9.2 years of a public sector employee’s working life) – whereas their public sector counterpart will either be on sick leave, holiday, strike or in retirement.
Since 2002, the public sector wage bill has increased three times faster than the private sector wage bill, growing by 33% in real terms, or £67 billion.
The total pay bill for managers has doubled in real terms over seven years. The amount spent on managers’ pay has increased by £14 billion. Spending on non-core jobs like marketing, office managers and customer service roles also increased by £4 billion.
Yet in the decade between 1997 and 2007, public sector productivity also fell, while productivity in the private sector increased by nearly 28% – leaving the former only two-thirds as productive as the latter.
Neil O’Brien, director of Policy Exchange, said: “Under the last government the pay bill got totally out of control, increasing three times faster than in the private sector. Pay spiralled even though productivity was collapsing, and we need to get it back to a realistic level.
“The previous government’s projections already implied a real terms cut in pay. To get things back
under control, we should freeze the public sector pay bill in cash terms for the next four years, taking
the pay bill back to where it was in 2003 in real terms. We should also follow the example of Ireland and
other European countries, and ask public sector workers to pay some more towards their pensions.”
Andrew Lilico, Policy Exchange’s chief economist, added: “People used to say public sector workers had great pensions to make up for their low salaries. That is now out of date, as public sector workers have much better pay, as well as better pensions and conditions. People in the public sector are better paid and have pensions worth more, while enjoying shorter hours, more time off, and earlier retirement. There is scope to make savings without being unfair.
“Most countries getting their debts under control are using a mix of wage freezes, cuts and also addressing pensions liabilities, which in almost all cases has been met with fierce trade union opposition. It is likely the same will be the case here, although the reality is that phasing out national pay bargaining, and replacing it with local wage bargaining, would be fundamentally more efficient.”