Pay gap between public and private sectors 'widens'

Public sector workers receive not only better pensions but higher pay than their private sector counterparts, official figures reveal.

The Office for National Statistics says that the gap between public and private sector wage rates rose to 7.8 per cent last year. It's the largest gap since the ONS began collecting this information in 2002.

Given the substantial catch-up in public sector pay over the past few years, the tradition that public pay has always lagged behind private pay, and the decimation of final salary pension schemes in private companies, the data points to public sector workers never having had it so good in relation to the private sector.

The recession greatly accelerated the trend; many private companies struck deals with their staff and unions for pay freezes or cuts in return for fewer job losses – but pay in the public sector continued to climb. However, the Coalition Government's pay freeze for those state sector workers on more than £21,000 and proposed reforms to public pensions will narrow the gap in the years ahead.

The ONS survey takes account of marked disparities between the types of people working in the public and private realms of the economy. The 6 million public sector staff tend to be older and more likely to hold a degree or other higher education qualification than the 23 million employed in private companies.

Thirty-eight per cent of public sector workers are graduates, for example, against 23 per cent of private sector ones. But even discounting for these variations, the pay gap is still 7.8 per cent on a virtually a like-for-like comparison: employees in the banks nationalised since 2007 are also treated as though they were still part of the private sector for statistical purposes. The ONS admit that bonuses, especially important in the City, and the self-employed are excluded from their analysis, but argue that these would not change the big picture in any case.

One substantive explanation for the gap is the increase in public spending, especially on the health service, that took place between 2001 and 2008, and the improvement in the pay of often poorly-paid health and teaching professionals made a priority after Labour came to power in 1997.

The presence of relatively strong public sector trade unions protecting those at the bottom of the income scale also appears to be a factor.

TUC General Secretary, Brendan Barber, said: "The clear benefit of union membership for low-paid public sector workers is not just something we should celebrate for reasons of social justice, but because it's good for economic growth and stability."