Pay gap between private and public sector increasing – report

Pay levels in the private sector are back to pre-crisis level, according to an analysis by the Institute for Fiscal Studies (IFS), which suggests private sector pay is likely to rise faster over the coming years while pay in the public sector falls.

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Two reports by the institute have noted that the gap between pay levels in the UK’s public and private sectors is back to pre-financial crisis level, with those working in the private sector likely to see their remuneration increase.

After 2008, private sector pay fell faster, with workers in the public sector enjoying better pensions and benefits. However, from 2010, with the living cost rising, public workers started to be hit harder by falling wages.

Drawing on predictions by the Office of Budget Responsibility, the reports argue that pay for private sector’s workers will raise faster than for those in the public sector.

Jonathan Cribb, a research economist at IFS and an author of the reports said, “The biggest difference between public and private sectors remains the value of employer contributions to public service pensions. These are on average, much more generous in the public sector than in the private sector.

“Over the last 15 years, changes in the gap between total remuneration in the public and private sectors has been driven more by the changing value of pensions rather than headline pay. Pay and pensions need to be considered together.”

Frances O’Grady, general secretary of the TUC, commented, “The pay squeeze looks set to go on and on, which will not only make public sector workers suffer further years of cuts in their living standards, but also hit the quality of the services that bind our society together.”

A recent separate report shed light on the widening wealth gap in the UK, with top bosses and executives now earning 180 times the average UK worker.

Photo: Images_of_Money via Flickr

Further reading:

Gender pay gap has widened since recession

Executive pay 180 times average – as wealth gap increase

Non-executive directors can play a key role in sustainability

Executive pay as an issue of responsible business

Chief executives see 6% increase in remuneration package