Business

Private sector pay 'to rise faster than public sector'

Cash and calculator Image copyright PA
Image caption The pay gap differs for different types of workers in different parts of the country

Pay in the private sector is likely to rise faster than public sector wages in the next four years, a report from the Institute for Fiscal Studies has said.

The independent research institute said the pay gap between public and private sector workers had nearly returned to pre-financial crisis levels.

For men, there is little difference, but women in the public sector get paid 8% more than private sector staff.

However, the IFS points out that pensions must be considered too.

It said that a large majority of public sector workers were saving into more generous defined benefit, largely final-salary, pensions. This compared with 12% of private sector staff on pensions of this kind.

'Recruitment issues'

The report said that at the height of the financial crisis, between 2008 and 2010, private sector pay fell faster in real terms than public sector pay.

This had reversed since 2010, when public sector pay fell faster after taking the rising cost of living into account.

The IFS points to predictions from the Office of Budget Responsibility that pay will grow faster in the private sector over the next four years.

"If correct, this implies that the gap between public and private sector pay levels will fall back to levels last seen in the late 1990s and early 2000s, when there were recruitment and retention problems in parts of the public sector," the report said.

Frances O'Grady, general secretary of the TUC, said: "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."

However, Jonathan Cribb, the author of the report, said that the biggest difference between the private and public sector was the value of employers' contributions to pensions, which were much more generous in the public 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," he said.

He also highlighted that there was a considerable variation in the pay gap between the public and private sector depending on the type of worker and the area of the country in which they worked.

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