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Damian Walne
Director, Socio-Economic Centre
Damian Walne

Public and private sector earnings – it’s not straightforward

Authors: Damian Walne Damian Walne, Head of Socio-Economic Programmes

11 March 2014

The ONS yesterday (10 March) released a paper on public and private sector earnings. When an ONS paper opens with the line that, “Comparing the pay of the public and private sector is not a straightforward task,” then the statisticians are not kidding.
The ONS analysis draws from the Annual Surveys of Hours and Earnings (ASHE). There are a few health warnings to say up front. The surveys tell us about employees but not self-employed people. It tells us about gross earnings but not other forms of remuneration like pension contributions, insurance, or company cars. Meanwhile, identifying the difference between public and private sector is always tricky. It’s not clear within the paper, but it looks like it reflects the ONS’s definition around the ownership of the employer. So, for example activities like further and higher education, and state-backed banks, are part of the private sector.

But from it all, I take three messages:

1. Public sector employees earn more than private sector employees
2. But not really… private sector employees earn more than public sector employees.
3. And it varies across the country.

1. Public sector employees earn more than private sector employees

The headline result is that the median gross earnings excluding overtime for public sector employees (in 2013) is £14.15 per hour. That’s about 35% higher than for private sector employees’ £10.48 per hour. But the private sector has some very high earners. So the ONS adopts the mean wage as the average. That gives us mean gross earnings excluding overtime for public sector employees (in 2013) of £16.28 per hour. That still gives public sector employees a 15% edge over private sector employees’ £14.16 per hour.

2. But not really...

The catch is that comparing public sector employees with private sector employees is not comparing like-with-like:

  • The public sector has a greater share of highly-qualified employees and higher level occupations. The paper suggests 41% of public sector employees are ‘high skill’ compared to 23% in the private sector. We expect high skilled workers to earn more.
  • The public sector workforce is older. The ONS paper shows 44% of public sector employees are in the 35-49 age group and in the private sector this is 36%. We expect employees in this age group to earn more. The private sector has 15% of employees aged 16-24 and at the start of their working lives.
  • Public sector workers tend to work in larger organisations. Earnings tend to be higher in larger organisations, for example, where there may be more managerial roles.
  • The ONS statisticians run some regression analyses / technical wizardry to control for factors around occupation, age, gender, job tenure, organisation size etc. They find that the headline results flip around. Private sector employees earn about 2% more than public sector employees.

    3. It varies across the country

    So we have a conclusion that public sector employees may earn a little bit more, or maybe a little bit less, than private sector employees. This finding does vary across parts of the UK. When the ONS breaks down the analysis by statistical region, it shows that in London and south eastern England, private sector employees earn significantly more than those in the public sector. In north eastern England and Northern Ireland, it is public sector employees who earn more. This really just tells us about the wider variation in private sector wages across the country and in which areas the better paying private sector jobs are locating.

    Earnings look to be more about who you are and what you do. That matters more than whether the pay slip comes from the public or private sector. 



Comments in Chronological Order (Total 1 Comments)

danny blanchflower

13 Mar 2014 4:34PM

gap between private and public pay likely to be larger given differences in education, that the ONS did not include. These data are not available in the ASHE employer level but are in the LFS and when included give even bigger private sector positive differentials