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13.03.17

Pay gap between public and private sector falls back to ‘pre-crisis levels’

The pay gap between workers in the public and private sector has fallen back to “pre-crisis levels” due to the squeeze on public sector pay and pensions since 2010, a report by the Institute for fiscal Studies (IFS) has revealed.

The review funded by the Office of Manpower Economics, said that during the financial crisis, the pay premium experienced by the public sector relative to those in the private sector went up from 3.7% in 2006-07 to 6% in 2010-11 – after accounting for the differences in the make-up of each workforce – and revealed that since 2010 cuts to pensions and pay has brought the gap back down to 3.6% in 2015-16.

The report also used the survey of higher education leavers ‘the Destination of Leavers from Higher Education from 2006 to 2014’ to determine the educational achievement and salary of graduates joining major public sector organisations in those years. In terms of teaching, it said that the average educational achievement of those going in to teaching had been steady over time, saying that teachers who left university in 2014-15 had an average of three A-Levels and an AS level at grade B.

The findings concluded that though there had been little change in the educational achievement of new graduate entrants to teaching and health occupations over the last Parliament, a squeeze on pension and pay had led to the premium on pay for workers in this sector compared to the private sector falling back to the same level as it was before the financial crisis.

The IFS reported: “During the Great Recession, public sector pay increased relative to that of private sector workers. The gap in pay between public and private sector workers has since fallen back to pre-crisis levels as the pay and pensions of public sector workers have been squeezed since 2010. 

“Nevertheless, in new work published today, IFS researchers find little change in the educational achievement of new graduate entrants to teaching and health occupations over the last Parliament.

Luke Sibieta, an author of the report, commented: “Despite the squeeze on the pay and pensions of public sector workers since 2010, there has been no decline in the prior educational achievement of graduates going into teaching or health occupations.”

Sibieta also warned that public sector pay was due to decline rapidly between 2015 and 2020, saying that: “It is hard to believe this won’t affect the willingness of highly qualified individuals to choose these occupations.”

Another author of the report, Neil Amin-Smith also commented specifically on the report’s findings with regards to teachers, saying: “Although there is clearly a quantity problem in terms of the number of Physics, Computing and Maths teachers, there is no evidence of a quality problem.

“Those who do go into teaching are relatively high achieving. There is some evidence that the large bursaries created for these subjects may have prevented declines in the educational achievement of new entrants, as has occurred in other subjects.

“Whether bursaries of over £25,000 (tax-free) represent genuine value for money for the taxpayer will be determined by whether these teachers stay in the profession beyond 1 or 2 years.”

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