If you want to be trusted more: claim less

January 9th, 2010 by Ben Goldacre in bad science, politics, spin, statistics | 55 Comments »

Ben Goldacre, The Guardian, Saturday 8 January 2009

“Public sector pay races ahead in a recession” shouted the front page of this week’s Sunday Times. “Public sector workers earn 7% more on average than their peers in the private sector — a pay gulf that has more than doubled since the recession began.” The Telegraph followed up with a copycat story a few hours later.

In reality, this is one of those interesting areas where anybody who makes a firm statement is wrong, because there is not sufficient evidence to make a confident assertion in either direction.

The Sunday Times have identified a difference in the median pay of all public sector employees in the country, when compared with all the private sector employees in the country, and overextrapolated from there to claim that – job for job –public sector employees are paid more than their peers in the private sector.

We will discuss whether that figure is worse than useless in a moment.

But first, some interesting details. For their analysis the Times use “annual salary” instead of “hourly pay”, although the latter is clearly more meaningful, especially since the Times quote the annual salary figures for part-time and full-time employees, all mixed together, but 31% of public sector jobs are part-time, against 23% of private sector jobs. In fact, quoting “hourly salary” would also have made the difference between the public and private sector median wages look even bigger. So why did the Times and the Telegraph use annual pay?

image Perhaps because this figure makes the difference in medians look like a new phenomenon under the present government. Using the hourly figures, you can see that public sector median pay has been higher than private sector hourly pay for years. If you go to the “Annual Survey of Hours and Earnings” data on the ONS website which the Times used, you can see for yourself. It was £7.98 vs £6.72 in 1997 under the previous government, a difference of almost 20%, and £8.56 vs £7.32 in 1999. Meanwhile the “annual salary” difference which the Times chose to use was negligible in 1999 (the first year ONS gave this figure), at £15,002 vs £14,963, a difference of 0.3%, allowing them to create this illusion of a brand new phenomenon (for example, see their graphic, here).

More than that, using the “annual salary” figure allows the Times to claim dramatically that the difference has doubled in 2 years: the difference in medians for annual pay has gone from 3.8% to 6.8% since 2007, while the difference in hourly pay has gone from 25.1% to 28.7%, which is much less eye-catching.

“By a whole range of measures,” the Times continues: “public sector employees are also enjoying better working conditions. Last year the average public sector worker laboured for 35 hours a week… 2 hours less than the typical private sector worker.”

Is this really down to laziness, and better working conditions? No. Again, this is simply due to the greater number of part time jobs in the public sector – 31% vs 23% – which is a longstanding phenomenon.

But there is a deeper problem with the analysis in the Sunday Times and the Telegraph. The longstanding difference in median wage for all jobs in each sector is hardly informative on the question of whether someone is paid more or less than their peer in the other sector. Firstly, it’s hard to decide what the comparison job is for a policeman, a fireman, a teacher, and so on.

Secondly, to make that comparison between medians meaningful you’d need data showing the breakdown of what kinds of jobs are done in each sector. Because it’s possible, after all, that the state employs more people in more senior or middling roles, and fewer people in the kinds of jobs you find at the absolute bottom of the employment ladder.

If you like, for an illustration, we can poke around the ONS ASHE data again. The national median hourly wage is £11.03. If you take table 14_5a of the ASHE 2009 data, re-order it by wage, and look at the bottom 3 categories with over a million people in them, as a rough illustration, we have: 1,126,000 sales and retail assistants on a median hourly wage of £6.36; 1,355,000 cashiers at £6.40; 1,430,000 in sales at £6.45.

None of these are jobs you find in the public sector, although there are also cleaners at the low wage end of this table. If someone here was quoting data comparing public/private wages for the same kind of cleaning jobs, say, then that would be interesting. There’s no such data on offer. But as the Times says: “our reports today show, the public sector has become so big and such a generous employer that it is sucking workers out of private companies”. I don’t see how they can justify this, other than with their laughable case studies, and if it’s true, it should be an longstanding trend, not a new one.

I could go on. It’s not surprising if public sector pay increased from what it used to be, under this government: improving recruitment for teachers and the like was a manifesto promise. But as for a comparison, I don’t know if the public sector pays more than the private sector for the same work, or less: nobody does, from a difference in median wages. Meanwhile I do know that this was one of the most statistically misleading front page stories I have seen in a long time. It’s going to be a fun election.


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55 Responses



  1. Statto said,

    January 9, 2010 at 12:31 am

    If a newspaper publishes something which is factually correct, but cherry-picked and misleading, like this, is there any recourse? Are there circumstances under which a correction should be printed?

  2. Ben Goldacre said,

    January 9, 2010 at 12:37 am

    i suspect that public mockery is your only recourse. personally i just find it disappointing: i’d like to be able to treat newspapers as resources of reliable information. it would be convenient, apart from anything else.

  3. sarahluv said,

    January 9, 2010 at 12:44 am

    I presume that the head of the PCS/FDA (the two main civil service unions) will write to the editor and the letters will be published. that’s usually what happens.

    Also, a lot of low paid work such as cleaning will be sub-contracted to private firms, thus artificially inflating the median public sector wage further.

  4. Ben Goldacre said,

    January 9, 2010 at 12:49 am

    haven’t got them on me, but the accompanying graphs on the paper copy of the Sunday Times piece were particularly “gotcha” in presenting the impression that this was a new phenomenon under the current government. if anyone still has a paper copy and a cameraphone and wants to email a pic, do, or better still, photograph it / blog it yourself, and link…

  5. Duck said,

    January 9, 2010 at 12:58 am

    Nope, low-paid work which you might assume is ‘public sector’ is often outsourced to the likes of Sodexo (uk.sodexo.com/), so your hospital cleaners & kitchen staff are probably technically ‘private sector’ – minimum wage either way, but with a crap contract, poor conditions, & no union.

  6. Statto said,

    January 9, 2010 at 1:41 am

    Ben: ‘Gotcha’ graphs from Sunday Times piece here. They’ve even got the classic ‘graph with axis starting at a point other than zero’.

  7. Ben Goldacre said,

    January 9, 2010 at 1:54 am

    thanks!

  8. Statto said,

    January 9, 2010 at 2:00 am

    No worries.

  9. Psychedelia Smith said,

    January 9, 2010 at 2:42 am

    You know, I was going to resist reading your article as it’s normally my Saturday morning treat, but this time I’m glad I did. A bravuro performance Ben; like watching a master fencer or a neurosurgeon at work.

    The most elegant takedown I’ve seen in a while; I wouldn’t have even thought of debunking this story. But maybe that’s because I don’t work in the public sector…

  10. ffutures said,

    January 9, 2010 at 9:12 am

    There’s another big factor screwing this – for various reasons which tend to have very little to do with pay there are a lot more long-term employees in the public sector, e.g. people who went to work from school and have stayed on, sometimes into their sixties. That’s a bigger proportion of people who are on full rather than starting salary, have earned long-term service pay rises, etc.

  11. Jonarific said,

    January 9, 2010 at 9:29 am

    I seem to remember some typically bias poly toynbee piece arguing the exact opposite and people tearing large holes in it.

    A good case study to look at would be my profession – town planners. It’s about a 50/50 split in terms of private/public sector.

    For what its worth, my anecdotal view is that private gets paid more by about 10%, but then I also get a little more holiday and flexitime and so its probably a relatively fair market.

  12. eflskeptic said,

    January 9, 2010 at 9:38 am

    “Last year the average public sector worker laboured for 35 hours a week… 2 hours less than the typical private sector worker.”

    Extremely disingenuous comment from The Times. 35 hours may be what the contract says, but when I worked in an FE College, everyone had to do masses of unpaid overtime to get the work done.

  13. Veronica said,

    January 9, 2010 at 9:50 am

    Median annual salary is about as useful, then, as global average temperature. Nobody in the known world actually experiences it.

    A neat analysis, Ben, thanks. Lies damned lies and statistics. Now tell us about the differences in pensions between the two sectors.

  14. Mijin said,

    January 9, 2010 at 11:00 am

    “35 hours may be what the contract says, but when I worked in an FE College, everyone had to do masses of unpaid overtime to get the work done.” – eflskeptic

    True, and I’d say the private sector figure is also very misleading.
    Certainly I’ve worked at places where my contract said 37 hours, but you could work an additional 10 hours on top of that, unpaid, and still be the bad boy of the office.

  15. Ian said,

    January 9, 2010 at 11:14 am

    “it’s hard to decide what the comparison job is for… …a teacher”

    I’m a private sector teacher, i.e I work in a private school. My contract states that my employer will “maintain at least parity” with public sector. If that’s true for all teachers in independent schools then we must get paid more (hooray!). However, the school’s weasel lawyers (Mr Toad’s lawyers work for the public sector apparently) have since decided this phrase refers only to salary and not conditions so I seem to work very long hours (the janitor used to throw me out at 6pm but now he works longer hours too) and do a lot of stuff the here in Scotland the McCrone agreement precluded teachers from doing. Maybe this comparison thing isn’t so easy after all – having previously taught in the public sector it’s definitely not the same job.

  16. mauve said,

    January 9, 2010 at 11:21 am

    “Median annual salary is about as useful, then, as global average temperature. Nobody in the known world actually experiences it.”

    Actually, by definition, someone has to experience the median salary.

    Median salary, and particularly change in median salary, is a useful socioeconomic indicator; what median salary does not do is say anything about pay fairness.

    Likewise global average temperature is an indicator of climate change on a global scale – aka. global warming. It does not tell you about local climate change (the UK could get much colder). But I suspect you’re just trolling about this.

  17. Paula Kirby said,

    January 9, 2010 at 12:13 pm

    A wonderfully sane and informative analysis, as ever, Ben.

    But even if these claims could be taken at face-value, note how the same papers that can be depended upon to kick up a stink about public sector salaries when it suits them are precisely the ones who, again when it suits them, will kick up a stink about NHS nurses and doctors not being paid enough.

  18. misterjohn said,

    January 9, 2010 at 12:20 pm

    “Actually, by definition, someone has to experience the median salary.”
    Not true.A very simple counter example would be to have 4 people who earned 10, 20, 30 ,and 40 thousand a year. the median is 25 thousand.
    In practice it is very plausible that some one person (at least) will earn the median salary.
    Good analysis by Ben, and 9it demonstrates how easy it is to manipulate statistics, and how important it is to know what’s being compared.
    Similar issues arise with comparison of Male and Female pay; and to determine whether there are genuine changes over time is even more difficult.

  19. misterjohn said,

    January 9, 2010 at 12:21 pm

    “Actually, by definition, someone has to experience the median salary.”
    Not true.A very simple counter example would be to have 4 people who earned 10, 20, 30 ,and 40 thousand a year. the median is 25 thousand.
    In practice it is very plausible that some one person (at least) will earn the median salary.
    Good analysis by Ben, and it demonstrates how easy it is to manipulate statistics, and how important it is to know what’s being compared.
    Similar issues arise with comparison of Male and Female pay; and to determine whether there are genuine changes over time is even more difficult.

  20. Jeesh42 said,

    January 9, 2010 at 12:42 pm

    You should be an economist! This is a fantastic article – well done sir.

  21. tomrees said,

    January 9, 2010 at 1:24 pm

    I was rather hoping that the public sector are paid more. There are far too many scurrilously paid people in this country, and too great a gap between the bottom and the top. It would be nice to think that our elected officials weren’t contributing to that, but naive to hope for it, I guess.

  22. SimonW said,

    January 9, 2010 at 1:40 pm

    If fairness is at stake we need include geography as well. I’m reasonably confident the public sector is better paid for most roles ‘like for like’ in this part of the country, and pretty sure the opposite applies in inner London.

    But I think total conditions need to be considered, when I was in the public sector I had an indexed linked final salary pension. The argument then was the public sector was paid less because the jobs were more secure, and had better benefits.

  23. srw said,

    January 9, 2010 at 1:58 pm

    Congratulations on another fine article – and on branching out into a new area. ASHE is one of my favourite datasets.

    There is one more use for median salary data that hasn’t yet been mentioned – reminding people of the enormous disparity between the highest paid and most of the population. Most people will estimate that an “average” person earns somewhere around £40,000 to £50,000. If the simple fact that an “average” salary was more like £20,000 were better known it would be much easier to sell the benefits of progressive taxation to encourage increased equality.

    In fact, of course a true “average” income would be considerably lower, as the figure around £20,000 is only applicable to people in employment. It excludes pensioners and people on benefits.

  24. Rogerthomson said,

    January 9, 2010 at 5:19 pm

    One thought that occurred to me is one that has been mooted before (to the sound of much hysterical laughter),i.e. that public sector employees may be paid more because they are better qualified. In fact reading to the bottom of the article this seems to be the case – nearly 40% graduates in the public sector compared to 20% in the private sector. However the authors turn this around as further damning evidence – proof that the better salaries and conditions in the public sector are drawing graduates away from the private sector. (Strange that more money never seeems to attract unqualified workers).
    The data was “validated” by Straight Statistics – which on checking proved to be a campaigning website set up by Nigel Hawkes – health and science correspondent for The Times. Independent etc.

  25. Ravi said,

    January 9, 2010 at 7:53 pm

    Ben I’m a trade union official for UNISON and every day we have to deal with gross distortions about our members, their pay and their pensions.

    I read Bad Science a few months ago and loved it – it should be required reading for every MP and journalist.

    I was heartened to see your debunking of the misrepresentation of the stats by the Sunday Times. I’ve blogged about it on the union’s Local Government Matters Blog here:
    unison-em-locgov.blogspot.com/2010/01/we-reported-here-on-recent-sunday-times.html

    Some real facts:
    - over £1.5m public sector worker earn less than £7 per hour
    - the average pension for a council worker is £4,000 a year and for a woman it is £1,600. This is hardly so called gold plated pensions as teh right wing press would claim – it is more like tin foil plated

    Keep up the good work debunking the charlatans in science, journalism or wherever they may appear. You are providing a valuable public service.

    Ravi Subramanian
    UNISON (East Midlands) Regional Head of Local Government

  26. Al_McV said,

    January 9, 2010 at 8:07 pm

    What is conveniently forgotten is that by rescuing RBS through taking a majority stake the government effectively moved all their staff into the public sector – that’s why both public sector employment and ‘average’ earnings have jumped in the past year. Most public sector workers would also kill for the non-contributory final salary that was only recently ditched.

  27. chriswatts said,

    January 9, 2010 at 10:30 pm

    One point the hours of most public sector employees was increased from 35 hours to 37.5 hours. Meaning that public sector employees work longer than their private sector counterparts, therefore you’d expect them to be paid slightly more!

  28. overkill1 said,

    January 10, 2010 at 12:10 am

    As has been already pointed out, comparisons between the two sectors based on data that is neither non reflective of the true picture, ie like for like work, or contains anomalies, renders, as is so often the case with the press (why distinguish, they are all bar one, right wing in the terms of political support?) the articles meaningless.

    The only reason people stick with the public sector is for a measure of job security, although that was largely eroded under the Major govt, and for the fast shrinking pensions. With the change in govt, even those are likely to swept away as well. DC is privately warning the SMT’s that the cuts he is publicly warning of, are just the tip of the iceberg, and that most areas of the Public sector can expect (on top of the proposed March 2010 changes under the current mob) to see swathes of privitisation, job cuts and pay freezes.

    While the public may applaud (misguidedly) the cut in public spending and the cut in Public sector workers, they may live to regret the govt carrying out privatisations, and thus potentially compromising impartiallity, that even the US feels are going too far.

    As a friend of mine recently stated, only a Public sector worker who needs their head examining would vote Tory. Which, considering how desparate Labour are to to be seeing to hammer the ‘lazy overpaid pen pushers’, is saying something.

    One thing I notice only Ben picked up, is that far from latching onto the fact that Civil servants are allgedly (and, as the Unions point out – incorrectly) are paid ‘more’ shouldn’t the public be concentrating on just how badly paid (and treated) the average Private sector worker is? Although on the latter score, as the Unions will tell you, Civil service managers are not far behind………

    Once again a great comment by mr Goldacre, and far more succinct and cutting than I could ever be.

  29. smcintosh said,

    January 10, 2010 at 12:35 am

    I knew it was an advantage to take up teaching science as a career! I am so glad that the 50+ hours a week and relentless intrusive nature of the job has rewarded me with higher pay than in the private sector.

    Sarcasm aside, even if they had not badly interpreted the data for the article and I actualy did get paid more than private sector employees I have no doubt I work a lot harder, longer and with more skill than they do. :D

  30. cardinalsin said,

    January 10, 2010 at 10:49 am

    I wrote to Nigel Hawkes of “Straight Statistics”, quoted in the Sunday Times article in support of its conclusion, having a go at him (albeit much less rigorously than Ben) and asking him if he seriously supports such a misleading article. He said yes, and went on to quote his blog in support.

    In it, he quotes a study by Chatterji and Mumford comparing public sector salaries by two (rather broad) job categories. Ben, I’d be really interested to know what your view is on this study. Any chance of an analysis?

    The blog page is here:
    www.straightstatistics.org/blog/2009/10/13/whos-fattest-cat-private-or-public

    The study is here:
    www.dundee.ac.uk/econman/discussion/DDPE_209.pdf

  31. mikethehat said,

    January 10, 2010 at 11:18 am

    “i suspect that public mockery is your only recourse. personally i just find it disappointing: i’d like to be able to treat newspapers as resources of reliable information. it would be convenient, apart from anything else.”

    Why? The papers are there to make money for someone, not actually inform anyone. Indeed to achieve a loyal readership big enough to make money they need to have a distinctive style and position and it probably helps if they polarise their readership. Any truth or actual facts are probably highly inconvenient to such a business model.
    Luckily we have the BBC for information. It’s not perfect but it does have a charter and public interest and people to complain to if you feel it’s failed to be accurate/fair and so on… as, apparently has happened to the BBC’s coverage of science! Because it’s so much worse than all the other media outlets :)

  32. JimJam said,

    January 10, 2010 at 2:03 pm

    The same thing has happened in Ireland, with the private being turned against the public sector over the difference in wages,

  33. Calanais said,

    January 10, 2010 at 3:50 pm

    I’m not surprised to see media attacks on public sector pay while the current government changes civil service redundancy rules to make it cheaper to sack us. As a PCS rep, I come across crap about “overpaid Whitehall bowler-hatted mandarins with gold-plated pensions” all the time.Ben (as usual)has nailed the flaws in this story dead centre. In my office, all the lowest paid jobs are done by private sector employees on contract. Also, many at the lowest grades are having their jobs taken over by automated systems.

  34. misterjohn said,

    January 10, 2010 at 4:40 pm

    30. cardinalsin
    The summary of the Chatterji & Mumford report seems to reach a similar conclusion to Ben.
    “These findings suggest that there is no simple relationship between public sector pay and private sector pay. The High skilled receive a premium in the private sector and, at the opposite end, Unskilled public sector workers receive a premium over their private sector counterparts. The earnings inequality between the Highly Skilled group and the unskilled is however similar in the two sectors. In both, the premium for being in the Highly Skilled group compared to the Unskilled group is considerable at over 60%. In managing public sector pay, these differences between the opposite ends of the occupational hierarchy may need to be borne in mind.”
    So skilled men in the private sector earn more than in the public sector, whereas unskilled men earn less in the private sector.
    They are comparing only men here, in order to reduce the number of variables, but it’s educative and sadly unsurprising that members of ethnic minorities earn less in the private sector for comparable work, skilled or unskilled.
    Overall this report does NOT support Hawkes’ views in any meaningful way. I question whether he actually read it, as even the Abstract doesn’t endorse his interpretation.

  35. rw23 said,

    January 10, 2010 at 4:44 pm

    The Times article contains another item, with a title which amply demonstrates their bias:

    —-
    Victim of public sector golden age

    Zoe Waas, 39, only employs people part-time at her cleaning company in Morpeth, Northumberland. ‘When I advertise for staff to work under 16 hours per week, I struggle to find anyone as they can get more hours and more pay in the public sector,’ Waas says. ‘One of my employees left my business to work for the public sector after she had been with me for about one year. I am quite certain it was for financial reasons.’
    —-

    Then pay your employees more! That’s what a free market is about, isn’t it? The market is a market in labour, not just in goods. Don’t moan when your competitors value someone’s work, attitude and commitment at more than just the minimum wage I bet you’re offering.

  36. skyesteve said,

    January 10, 2010 at 8:02 pm

    Well I work in the public sector and I know fine well I could earn twice as much if I did the same kind of work in the private sector. In addition, I am part-time which in my case means a 35 hour week – my full-time colleagues are doing >50 hours. So why do I/they do it? Something to do with vocation and a desire to do public service I guess, though I suppose that’s a terribly old-fashioned statement since Thatcher’s “me first, sod society” revolution.
    If the reality is that public servants don’t earn as much as those in the private sector well they bloody well should. Too right a binman or a postman or a nurse or teacher or a policeman or a paramedic or a fireman should earn far more than some meg-mall, pin-striped, grease ball trying to sell me extoritonate insurance on a fridge that I don’t actually want or need.

  37. grumpyoldman said,

    January 10, 2010 at 10:18 pm

    Yet more cr*p data – the Times claims that 14% of the Australian workforce is in the public sector. The ABS (Australian Bureau of Statistics) states “In August 1997, 22% of all employees in Australia worked in the public sector.”

    Mind you, public sector in Australia includes Federal, State, and local government – I wonder what is included in the new UK (new since I left in ’69 ….).

  38. Statto said,

    January 11, 2010 at 12:03 am

    Interesting to read the Straight Statistics advice to The Sunday Times: ‘That doesn’t make a very simple story, I’m afraid.’

  39. Ginger Yellow said,

    January 11, 2010 at 1:39 pm

    “If you take table 14_5a of the ASHE 2009 data, re-order it by wage, and look at the bottom 3 categories with over a million people in them, as a rough illustration, we have: 1,126,000 sales and retail assistants on a median hourly wage of £6.36; 1,355,000 cashiers at £6.40; 1,430,000 in sales at £6.45.

    None of these are jobs you find in the public sector”

    Really? What about cashiers in the Post Office?

  40. HenryS said,

    January 11, 2010 at 1:41 pm

    Some more musings about this here: www.jamesdodd.org/wordpress/2010/01/10/ben-goldacre-steals-my-content%E2%80%A6/

  41. socialemotions said,

    January 12, 2010 at 8:23 am

    Say we take the meaningless stats on good faith for a moment (as I’m sure much of the Times and Telegraph readership would).

    The same article could be used to point out that the private sector drives down wages while increasing working hours. Good to see the papers stinking to their principles though.

  42. Nigel Stanley said,

    January 12, 2010 at 12:45 pm

    This is a fab piece.

    I also took this article to pieces on the TUC’s Touchstone blog on the day it was published. www.touchstoneblog.org.uk/2010/01/public-sector-pay-some-unstraight-statistics-from-the-sunday-times/

    Frankly I expect this kind of stuff from the Sunday Times, but the so-called vindication by Straight Statistics made me cross. This is why I invited Nigel Hawkes to reply – which he did in the comments to that piece.

    I then followed that up as five days later Straight Statistics said that they did niot vindicate the analysis.

    But there are still important questions for Straight Statistics as I say at www.touchstoneblog.org.uk/2010/01/straight-statistics-change-their-tune-as-ben-goldacre-joins-the-criticism-of-the-sunday-times/.

    The salient facts about public sector pay are:

    1) median hourly pay is higher in the public sector. This is largely due to the fact that it employs lots of graduates. This has been true since at least 1984. It is not new. The public sector has become more dominated by graduates over time as more such workers have been recruited (eg teachers, doctors) and low paid workers have been contracted out to the private sector EG clearners ansd canteen staff)

    2) graduates in the public sector earn less on average than graduates in the private sector (this is wages, not wider conditions).

    3)lower skilled workers earn more on average in the public sector. (The split point is A-levels where those with A-levels as their highest qualification earn the same.) This is partly due to the fact that the public sector (rightly) does not generally employ people on the minimum wage and the worst conditions.

    I won’t give all the references but I’ve been exploring this issue (using straight statistics) in a number of Touchstone posts, precisely because of the endless publication of pieces like that in the Sunday Times.

  43. gwigro said,

    January 12, 2010 at 2:47 pm

    Not the main point, but I was interested to see a 7% difference described as a ‘gulf’; the difference in pay between men and women, is about three times that at 22% in 2008 (ONS), yet is rarely described as a ‘gulf’ – just a mere gap…

  44. skyesteve said,

    January 12, 2010 at 3:15 pm

    @gwigro – I hope that nowadays in the public sector there is no pay gap/gulf between men and women doing the same job (e.g. nurses, police, doctors, military, teachers, civil servants, etc.) or am I wrong? If so how can anyone justify different wages for the same job, especially in the public sector?

  45. elvisionary said,

    January 12, 2010 at 4:50 pm

    This is an odd question except in the context of specific jobs. There’s a market for every type of job, and the private sector will pay more for some and less for others, depending on how they need to compete. In teaching, you might expect private schools to pay more than state schools, because they need to attract high quality teachers to justify charging fees for something parents could choose to get for free. (I’m not saying they always succeed in attracting the best – just that they have a competitive imperative to do so). In less skilled roles, private sector firms, who are often newer employers without a long history (i.e. without strong unionisation and benefits accumulatated over decades) are likely to compete by being cheaper and effectively paying people less. So it’s not at all surprising that the skilled benefit from being in the private sector, and the unskilled from the public sector.

    So what? It’s only a problem if (a) one group of people is being abused – which is why we have employee protections, minimum wages, union representation etc – or (b) the other group is extracting an excessively good deal for themselves, at the expense of the taxpayer (in the case of the public sector) or shareholders (in the case of the private sector).

    How do you extract an excessively good deal? You have the agency problem, where managers extract economic rent to reward themselves at the expense of shareholders. And you have the risk of some of the more extreme unions or trade bodies going beyond the legitimate protection of their members to extract economic rent through the threat of damaging industrial action.

    I’ve worked in both the public and the private sector. I don’t personally care what either pays, so long as it is a reasonable market rate for the role. Where I start to worry is where I think I’m being ripped off by groups of people who are using a position of power to their own benefit. And this applies in private and public sectors. Hence the anger over bankers’ bonuses, MPs’ expenses, and some types of industrial action (sorry union people, but you know who I’m talking about).

    But I ramble…

  46. Brady said,

    January 13, 2010 at 10:29 am

    OT but possibly very relevant:

    “The swine flu outbreak was a ‘false pandemic’ driven by drug companies that stood to make billions of pounds from a worldwide scare, a leading health expert has claimed.

    Wolfgang Wodarg, head of health at the Council of Europe, accused the makers of flu drugs and vaccines of influencing the World Health Organisation’s decision to declare a pandemic.

    This led to the pharmaceutical firms ensuring ‘enormous gains’, while countries, including the UK, ‘squandered’ their meagre health budgets, with millions being vaccinated against a relatively mild disease.”

    www.dailymail.co.uk/news/article-1242147/The-false-pandemic-Drug-firms-cashed-scare-swine-flu-claims-Euro-health-chief.html

    Would Ben like to comment?

  47. Fatz Burger said,

    January 13, 2010 at 1:05 pm

    What’s very frustrating are the people that left comments on that article (see Times page) that say “yeah…those pencil pushing, incompetent fat cats in the public sector have really benefited under Nu-Labour’s mismanagement of the economy”. It’s like there’s some sort of template-comment for idiots somewhere so they don’t actually have to think about the issue.

    As a government accountant, qualified with an ACA, I thought I’d look into a like-for-like comparison for people with the ACA, across the different sectors using ICAEW’s 2009 salary suvey.

    No prizes for guessing that government workers’ salaries are at the bottom.

    Another great post Ben.

  48. Cooper42 said,

    January 13, 2010 at 5:04 pm

    This is excatly what I needed the other day.

    Some third year undergrads (who were, actually, otherwise very bright) had – as we had asked (there’s a real, growing fear of numbers in Human Geography as a discipline) – gathered some statistical information for their presentation. Unfortuantely it was all pulled from various news sources which, on closer inspection, most turned out to be quite dubiously reported.

    I would, also, love newspapers to be reliable sources. It has, however, got to the point now that when I am teaching first years or reminding other undergraduates about source reliability, newspapers and online news sources are in the ‘unreliable’ category.

  49. gwigro said,

    January 14, 2010 at 1:23 pm

    @skyesteve – thanks for the comment. I have to start by declaring how little I know about this. But this is from the Office for National Statistics, and specifically on public/private sector, their information on gender pay differences in 08/09 says:
    “The gender pay gap in the public sector was 11.6 per cent for full-timers, 18.3 per cent for part-timers and 21.0 per cent for all employees. In the private sector, the pay gap was 20.8 per cent for full-timers, 0.4 per cent for part-timers and 28.8 per cent for all employees.” (full article at www.statistics.gov.uk/cci/nugget.asp?id=167).

  50. DanielDWilliam said,

    January 14, 2010 at 3:23 pm

    If there were a significant long term differential in the total package offered by the public and private sectors for like for like work the free and liquid market for labour that exists would remove it. People would move from the private sector to the public sector and keep doing so until the private sector was starved of labour and had to put up their wages.

    A difference might persist in jobs where there was some special requirement, for example medicine or some restriction on moving freely, such as along training period but in the long run that difference should be erroded as people jump over whatever hurdles are preventing them from making an immediate move.

    I am a professional about to move from the private sector to the public sector. I will probably earn slightly less over the next five years cash in hand but this (in my view) is made up for by more holiday, flexible working, a much better pension and better opportunties for training and development. I choose to take time now and in the future over money now. I parley my position in the market into a remuneration package of size and shape that is acceptable to me. In time I may decide that my current work is not interesting enough for me so decide to take a lower salary whilst I retrain to do something more interesting. I may take a smaller remuneration package for a more interesting job. To hire me as an accountant will cost you £50k a year or better holidays, as an economist £40k on average and I’ll be an astronaut for free. For beer tasting I’ll pay you. Others are free to make their own choices.

    The theory of supply and demand leading to an equilibrium price that we’ve seen work in almost every other field of economics appears not to be working in the UK labour market. Either the theory is wrong or the data is suspect.

    If the public sector were offering both higher salaries and better terms and conditions workers in the private sector would have to be either irrational, ignorant or keen to sacrifice their own narrow self-interest for the good of the share holding classes. Is the Times really asking us to believe that private sector workers are stupid or that market systems do not correctly allocate resources?

  51. Deasun said,

    January 19, 2010 at 12:29 pm

    And if you want to see some classic pseudo-scientific right-wing propaganda masquerading as a serious study, try the following:
    www.tara.tcd.ie/bitstream/2262/27906/1/WP270.pdf

    This relates to the Republic of Ireland, but I’m sure that there will be something similar for the UK. As always, skip to the methodology section. You may notice, for example, that the ‘paper’ compares only remuneration in the months of March 2003 and 2006 so, presumably, bonuses are not included! There are also some odd assumption made but not explained such as corrections for demographics. Naturally, the study concludes that the public sector is the land of milk and honey. Funny that!

    Anyway, why not compare jobs at various levels which do exist in both the sectors (e.g. lawyer, IT worker, press officer…). Surely, that would be more meaningful. Let me know what you think.

  52. Heuristic said,

    February 2, 2010 at 9:55 am

    There has been a lot of research conducted into pay variation, in particular “pay gaps” between men’s and women’s pay, between different industries, etc.

    The main issue, as has been pointed out above, is the number of important covariates that need to be considered when comparing, say, public sector and private sector pay.

    As has been addressed, the public sector employs a relatively large proportion of graduates (in a number of countries, a large volume of low paid men’s work – for example – was removed from the public service during 1980s public service structural reforms). Also, in some countries, public servants tend to be older on average, which is another good explanation for higher pay – older workers tend to be paid more than younger ones for social capital reasons.

    The main complexity of talking about private sector versus public sector pay is that often the comparisons are between apples and oranges with no attempt to control for differences between these two employer types. Good research on pay (which goes back to the 1960s) has tended to try to control for industry, and there have been some attempts to control for occupation. There are standardised classification of industry and occupation codes that can be used, to assist this process.

    Another key explanatory factor is job size, which is used by many employers to set the pay banding for a job. The translation of job size into pay is moderated by industry and occupation, so that jobs of similar size can pay quite differently depending on the particular role/scarcity of applicants for the particular occupation.

    Finally, employers actively check their pay scales against “market” remuneration information for occupations, and different employers pitch their pay scales to different levels of the market remuneration. For example, some public sector organisations peg their remuneration at around the 50% mark. Clearly, employer decisions around where to set their remuneration rates are going to directly affect employee pay.

    Any analysis of pay gaps that does not take account of these differences is simplistic and “bad statistics” let alone bad science.

    If anyone is interested, there is a large volume of peer reviewed research on pay gap analysis, in particular the Blinder-Oaxaca decomposition (multiple regression technique) has been used.

    cheers all.

  53. orangelavaglow said,

    February 20, 2010 at 10:10 pm

    As the story is also about economics and politics, why does it matter so much that there are separate ‘public’ and ‘private’ sectors?

    How does the mixing of public finance and private finance (such as introducing private finance initiatives to the NHS, or managemant consultancies to every aspect of the public sector)(or publically financing the entire banking sector) affect the legitamacy of any of these comparisons?

    Why do economists and ‘market analysts’ decide one sector is legitimate and the other not?

    but maybe the ‘science’ is a good place to start…

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