Public private pay differential broadly back to pre-crisis levels; pensions remain a big difference between sectors

10 Oct 2014 05:05 PM

In the immediate aftermath of the recession the real level of pay in the private sector fell much faster than that in the public sector. Since 2010 public sector pay has been held back such that the gap that opened up during the crisis has been closed. The level of pay in the public sector is now at broadly the same level as it was pre crisis relative to the level in the private sector.

There are significant differences in the patterns of pay between public and private sector, but more important than any of these are the different levels of pension provision. The large majority of public sector workers are members of defined benefit pension schemes. Only about 12% of private sector workers are now members of such schemes. On average across public sector workers this pension was worth about 19% of pay in 2011.

These are some of the conclusions from two new IFS reports, which are published today.

While the public private pay gap is now back at pre-crisis levels forecasts from the Office for Budget Responsibility imply public sector pay will continue to grow less quickly than private sector pay over the next parliament. This has the potential to create problems in recruiting and retaining staff of appropriate quality. At the same time the spending plans set out in the Budget imply substantial further cuts in public sector employment.

There are significant differences in the composition of the public and private sector workforces. After accounting for differences in age, region and education, in 2013–14, we find that for women, public sector pay is on average about 8% higher than in the private sector. Overall there is no significant difference between public and private sector pay for men.

There are significant differences in the composition of the public and private sector workforces. After accounting for differences in age, region and education, in 2013–14, we find that for women, public sector pay is on average about 8% higher than in the private sector. Overall there is no significant difference between public and private sector pay for men.

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Public Sector Pay in the UK