These headline figures suggest private sector workers are getting a raw deal relative to their counterparts in the private sector. But dig in to these figures from the Office for National Statistics (ONS) and one discovers that the average public sector worker earns £16.26 per hour whereas the average private sector worker earns just £14.16. That suggests public sector workers are 14.5 per cent better off. So what gives?
To compare the two raw figures is misleading because, on average, public sector workers have higher skill levels (think of all those graduate doctors and teachers) which should equate to higher wages.
The average public sector worker is also employed by larger organisations, which would also, other things being equal, mean higher wages. Adjusting for these two factors, and a few others, gives us the ONS estimate that the average private sector worker is now slightly better paid than the average public sector worker.
This is a highly relevant set of statistics. Politicians on the right tend to argue that public sector workers are grossly overpaid. These figures suggest that is an exaggeration. The breakdown is instructive too, showing the low-paid in the private sector are considerably worse off than those that work for the state.
That has big implications for the debate about the desirability of public sector outsourcing. Yet at the same time we shouldn’t get too hung up on pay figures. What really matters for living standards is incomes, rather than wages.
In other words, one has to consider the impact of taxes and benefits too. But the ONS doesn’t produce figures showing public sector incomes and private sector incomes. That is because income figures are compiled on a household basis, and many households have earning members who work for both the private sector and the public sector. It would be impossible to disentangle. To that extent, at least, we really are “all in this together”.