note to teachers: just be careful not to turn right when you get to the M62 as you head off for your better paid careers.
An equally worrying aspect of the divide is the low productivity in the public sector. Official figures show that productivity in the public sector has fallen by 2-3% in the last 10 years whilst in the private sector it has increased by over 20%. The fall in public sector productivity comes despite the government trying to include 'quality' improvement in the measure (e.g. GCSE pass rate improvements, even though we all know this was caused primarily by grade inflation).
Now I am not of the persuasion that the private sector creates all the wealth in this country while the public sector merely consumes it. After all, we'd still choose to pay for education and medical care were in the private sector so it's unreasonable to claim that it doesn't produce anything worthwhile just because it is currently primarily in the public sector. However, it is generally true to say that the public sector is generally consumptive of wealth in comparison with the private sector which is more generative of wealth. Consequently, it is very worrying that in the last decade we have directed a higher proportion of our wealth into the (more consumptive) public sector while its productivity has fallen. This is madness. If things have to be in the public sector, I see no reason why it should not be expected to generate efficiency improvements of similar magnitude to comparable private sector organisations before wage increases are awarded. This would concentrate the mind of the public sector enormously.
The lack of productivity improvements in the public sector has been noted before. Chris Dillow at Stumbling and Mumbling mentions it from time to time, e.g. here: http://stumblingandmumbling.type...t-and-
cuts.html. As Dillow says "it happens because wages, a big part of public spending, tend to rise faster than prices. It’s technically and politically hard for the public sector to pay “China prices“".
Fair dos, Tyler, you've shown that nothing really's changed since 1990 and to be fair to you, the destruction of defined benefit schemes out of the private sector would widen that gap.
I won't go into the apples and pears issue because you've dealt with it very well already. It would be interesting to know who's in which category, how about the boards of RBS and Lloyds?
Talking with my NHS colleagues about future, there's general acceptance that the state of the economy does mean a tough pay round for 2011/12 and onward. That's understood, but what isn't appreciated is the idea that the government should go back on a deal that they have already agreed (to be fair I don't think Labour or the Tories would go there) and the idea that the public sector has to suffer just because the private sector simply sounds vindictive.
DM Andy,
What ARE you talking about?
it is nothing to do with vindictiveness. Don't you understand that the money has run out and that to keep increasing or even to maintain public sector pay either means higher taxes on the private sector (e.g. the forthcoming employers NI contributions hike) which further lessens its ability to compete with overseas suppliers, or it means borrowing even more than the current forecast of £175bn p.a. - which means our children will be up to their eyeballs in debt.
As for going back on pay deals already agreed - a former private sector employer of mine did exactly that. It agreed a pay rise and then only three months later it cut everyone's salary by 10%. I don't recall a single person complaining because we all knew that market conditions made it absolutely necessary if the company was to survive. The company simply didn't have the option of forcing taxpayers to cough up - it was in a fiercely competitive global market in which prices were declining by 25% annually (semiconductor memory, since you ask). This was simply the most efficient organisation I have ever seen or worked for and it was doing what it had to do. The public sector in this country has absolutely no idea how sheltered it is from harsh economic reality.
For teachers, they should take an hours worked rate. 14 weeks with your feet up should mean 10 weeks less pay than other professions.
Regional pay needs to be introduced urgently.
HJ- I second your comments on how little the public sector understands the harsh economic reality the private sector now faces.
The world has totally changed in the last 5 years with companies outsourcing as much as they can to India. India and others are quickly moving up the value chain so its going beyond call centres and dogsbody IT to full on accounting and IT implementations. My company is shifting as much as it can to India and it grows every year as new skillsets are developed.
There are no longer pay rises, pensions are extinct and your job will mean long hours.
The public sector needs to get the message.
HJ, vindictiveness is how it's coming across with phrases like "the public sector must share the pain". The people I work with are not stupid, they know that public finances are going to be very tight and pay bills are going to be stretched. We completely understand that, but we're not going to put up with being portrayed as greedy and lazy.
I'm expecting something like the mid 90s shown in Tyler's graph when the private sector pay rises were running at 5-6% per year and we'll be on 1.5%. That doesn't bother me in the slightest.
DM Andy,
How can "the public sector must share the pain" be interpreted as vindictiveness? Perhaps if it had been claimed that the public sector should take all the pain, you might have had a point.
The plain fact is that the government got us into this mess by losing control of the money supply, thus fuelling a huge credit expansion, by excessive borrowing (both on and off the books) and by a huge diversion of resources from the sector of the economy where productivity was growing fast (the private sector) into the sector where it wasn't (the public sector). All these things it mistook as economic success. As a consequence, our industries couldn't compete internationally, we have run out of money and we have a huge trade and government deficit.
To recover from this, there will be a lot of economic pain. Are you suggesting that it should not be shared and that it should all fall on the private sector? If so, this sounds like vindictiveness on your part to me. It's also doesn't face economic reality - unless the public sector is made relatively smaller and more efficient, we will be far poorer in the long term than we should be. In the long term, we will all suffer, including public sector workers.
HJ -
We all know NuLiebour have driven the country on to the rocks, and part of that has been due to a large increase in the numbers of people working for government and local government. It doesn't surprise me that Public Sector productivity has fallen in recent years - how could it do anything else when you have so many non-jobs created? How can you even measure the productivity of a "five a day facilitator" (yes that is a job title in the NHS) or an Ethnic Diversity officer. I worked in a scientific area of the Civil Service which had to become more commercial!! - so recruited a "Brand Manager".
The people to blame for this cock up are fairly and squarely the current government. Too much complexity in the Tax/Benefits system, too much target driven drivel which is hugely expensive and massively inefficient to run. The latter has been the "millstone" for the NHS, Education and the Police.
The Public Sector organisation I worked for halfed in size over the years (we could do the same things with less people due to technology, so we did) - I was never over paid compared to similar work outside. Friends in "the real world" never thought I was a in a better position than them (especially as many had a company car) until the pensions debacle of the last decade fuelled by the Brown/Balls grab on Pension Funds. Of all the crimes those two are guilty of the ruination of pensions has to be the VERY worst.
I saw people in the Civil Service who were inefficient and close to useless - My wife who worked in large outside companies tells the same story. People who were brought in to my area of the Public Sector from the outside commercial world, often on an inflated salary, (perhaps another reason why the average is inflated) were with a couple of notable exceptions - useless.
Two thoughts
1. Don't blame Public Sector workers because successive governments have run a 50 year PONZI scheme for their pensions.
2. If you think teaching is easy - have a go at it. I wouldn't teach in Secondary Schools today for double the money. I reckon you probably need the holidays to survive.
PS - All this doesn't mean I don't understand the situation is serious - I really do.
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