Public and private sector pay – thoughts for the future Ken Mulkearn, Editor, IDS Pay Report, Pay...
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Transcript of Public and private sector pay – thoughts for the future Ken Mulkearn, Editor, IDS Pay Report, Pay...
Public and private sector pay – thoughts
for the futureKen Mulkearn, Editor, IDS Pay Report, Pay in the
Public Services
1 December 2007RCN Stewards National Conference
Government policy
Various elements, but lack of coherence?
No single location where policy is set out
Various sources
Most substantial - Treasury guidance on civil service pay
Contradictory...
Elements of policy
Pay rises must be affordable and prudent
Must be sufficient to motivate, recruit and retain
Should be consistent with inflation target
Reform of pay progression to keep more skilled staff in front-line roles
Pay progression should not be automatic
Equal pay is at heart of changes to pay and grading
Local/regional pay flexibility should be examined
New grading systems should be based on JE and single status
Three phases of policy
1. 1997-1999: New Labour government follows predecessors’ spending targets
2. 2000-2003: ‘modernisation’ period
3. 2004- ? : restraint, with pay rises in line with Government’s inflation targets
Elements of ‘modernisation’
Focus on national pay spines with varying degrees of local flexibility over grading
Job evaluation to address equal pay problems
Reform of grade structures, with shorter scales and emphasis on career paths
Most success in NHS and schools
The current policy – outcomes (1)
Review Body remits expanded to include affordability and meet inflation targets
Local pay on agenda
‘Pay Gateway’ committee to police offers
Tougher policy - rhetoric and interventions
Impact on public sector pay rises
Effect on relative earnings growth
Public sector employment levels
-400
-300
-200
-100
0
100
200
1992 1994 1996 1998 2000 2002 2004 2006
change in employment (thousands)
Outcomes of policy (2)
Key public sector pay rises in 2007
Group/organisation % rise
Armed Forces Review Body 3.3 (most ranks)
Department of Work and Pensions 2.0 (maximums); 1.0-4.0 (minimums)*
Doctors’ and Dentists’ Review Body 2.0 (paybill)
Fire Service NJC 2.4
Local government NJC (E&W) 2.475
NHS Review Body (England) 2.0 (annualised; staged)
NHS Review Body (Scotland, Wales and NI) 2.5
Prison Service Review Body 1.5 plus 1.0 (staged)
School Teachers’ Review Body (E&W) 2.5
*First year of imposed three-year award
IDS Pay Databank – basic pay rises
For three months to end Nov 2007, based on 70 settlements covering 1,465,376 employees in total
Median 3.5% (whole economy)
Interquartile range 3 to 4.1% (whole economy)
Manufacturing and production 4.1% (median)
Private services 3% (median)
Public sector 3% (2007 median)
Relative earnings growthAverage earnings growth, public and private sectors, January 2005-
present
1.5
2.5
3.5
4.5
5.5
6.5
7.5
%
Privatesector
Publicsector
Ave earnings for key public sector jobs
Average earnings in key public sector jobs as a proportion of average for all employees
80
90
100
110
120
130
140
2000 2001 2002 2003 2004 2005 2006 2007
%
average forallemployeespoliceofficer
teacher
firefighter
socialworker
nurse
What’s in a pay rise?
More difficult to measure than first appears
Various elements – basic pay, progression etc.
Unique approach in civil service
Real difficulties in assessing contribution of progression
Private sector approach?
Public sector – is progression a benefit or cost?
Issues in public sector pay (1) - inflation
Government’s inflation target = CPI
But main measure in private sector = RPI
RPI used for indexation of pensions, benefits
Also used to adjust pay for inflation (‘real wages’)
Macroeconomic policy – other measures
RPIX – excluding mortgage interest payments
HICP (CPI)
HICP – Harmonised Index of Consumer Prices
Dec 2003 – Chancellor’s speech on Euro
Excludes council tax and housing costs
Method used for calculating changes in prices
Generally lower than RPIX and RPI
Criticised by Bank of England for excluding housing costs
‘Core inflation’
Inflation and pay settlements
0
1
2
3
4
5
1996 1998 2000 2002 2004 2006
% RPI
Median settlement
CPI
Are pay rises inflationary?
Wage negotiations normally retrospective
‘Wage-price spirals’ – do these exist?
Wage rises often accompanied by productivity rises
What’s really been driving inflation recently?
Issues in public sector pay (2) - local pay
Generally strong labour market
Key workers priced out of housing market
Private sector – raise pay levels in ‘hot spots’
Treasury: ‘Depts will be challenged on degree to which their pay proposals are consistent with local pay policy’
Previous public sector practice – focus on London and SE
Now – shift in emphasis to lower pay in ‘cool spots’
NHS – HCAS and RRPs
Issues in public sector pay (3) - ‘Total Reward’
Cabinet Office – policy and ‘toolkit’
Continuum of approaches…from ‘total reward statements’ to policies that include flexible benefits and performance-related pay
Different contexts in private and public sectors?
Mainly still an aspiration in public sector
Private sector – usually at better-paying firms, eg finance
Issues in public sector pay (4) – equal pay
Key driver for ‘Agenda for Change’
Gender pay gap wider in private than public sector, but persistent in latter at 14%, despite various initiatives
What impact will Government pay policy have?
Gap for ambulance staff narrowed from 7% in 2002 to minus 2.17% (in women’s favour) in 2007
But gap for nurses widened slightly by 0.2% over same period, to take it to 2.3% in April 2007 (but very low overall)