The unions campaigning for public sector pay rises have had no shortage of left wing or centre left journos backing their cause. 

It is sad that (in some cases) previously reputable mainstream journalists – they know who they are – seem now to hate Tory governments so much that they are incapable of looking at issues of this kind dispassionately, or indeed, looking at the root causes.

One weakness is that commentators often use 2010 as the basis of comparison. In fact 2010 turned out to be an abnormal year when the public sector pay “premium” peaked after 13 years of Labour government. In that year, the average public sector worker earned 15 per cent more than the average worker in the private sector. This is in addition to benefitting from favourable working conditions, indexed pensions and generally lower productivity. A better comparison is the average for the period from 2000-2020 in which case public sector pay is only slightly below its trend level.

It is undoubtedly true that public sector pay has recently been squeezed in real terms by more than in the private sector, though if the bonus and commission based real estate and financial service sectors are excluded from the private sector (which is surely sensible since their recent high bonuses are almost certainly temporary), the gap narrows.

But recently the public sector’s productivity has also collapsed. The latest data for 2022 Q2 shows productivity down 7.1 per cent below its pre-pandemic level three years ago. 

In the rail sector (rail is interesting because technically much of it is in the private sector but in practice it is in effect a public sector monopoly with public sector unions) Neil Robertson, head of the National Skills Academy for Rail (NSAR) has pointed out the extraordinary inefficiency in the sector saying that only “between 50 and 60 per cent of the money spent is efficient… 40 per cent is not… 10 per cent will probably never be spent efficiently, leaving 30 per cent we can do something about” and the unions are striking not about pay but about changed manning requirements that would relieve some of the inefficiency problems.

The ONS has tried to compare public sector jobs with those in the private sector after allowing for skills. Sadly, this misses much of the necessary granularity, treating former polytechnic degrees as if they were equivalent to Russell group. And they take no account of suitability. Many in the public sector are well qualified by alleged academic qualifications but lack either the attitude or aptitude for well paid jobs, something that the ONS cannot easily analyse. The types of woke employees who thrive in academia, for example, rarely manage to get employed in the real world.

Ultimately, if the public sector pays badly it will lose its labour force who will get jobs elsewhere. But equally, if its pay levels are excessive in relation to productivity, it will either have to shut parts of the public sector down or else be forced to put up taxes to levels that people are unwilling to pay. The Autumn Statement took taxes up very close to the level which maxes out the possible take.

There is probably a solution to this, which is to pressurise the public sector to get its productivity back at least to the level of three years ago. This would generate some cash which could be used to give higher pay to those for whom it is needed. 

But the idea that higher pay should be paid without reform to improve productivity simply means that someone else will have to pay. It is ludicrous to suggest that that will not damage the economy. Those journalists and other commentators who suggest otherwise do little to help their credibility.

Douglas McWilliams is the founder of Cebr. 

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