If we want high quality, highly qualified people delivering public services then we can’t let their pay fall relative to what’s available elsewhere.
I wrote a fortnight ago about how this Tory government has been rather more redistributive through the tax system than you might expect. They have cut direct taxes for those on modest earnings, while raising them for the rich. Their unexpectedly socialistic instincts have also characterised policy towards the 5.7 million or so members of the workforce who are employed by the state. Not by increasing their salaries overall to be sure, quite the reverse, but by increasing the pay of low earners while squeezing the highest earners, and squeezing them hard.
As my colleagues Jonathan Cribb and Laurence O’Brien showed in a recent paper, the 25th percentile of public sector earnings — that is, earnings a quarter of the way up the distribution — increased by 16 per cent in real terms between April 2007 and April 2023. Meanwhile, the 75th and 90th percentiles of public sector pay (the higher earners) fell by 8 per cent and 10 per cent respectively. In 2007 pay at the 75th percentile was 2.4 times higher than pay at the 25th percentile. By last year it was just 1.9 times higher. That is quite some compression. Pay in the private sector has also compressed — lower earners have done better than higher earners — though the differences are nothing like so stark.
Because men tend to earn more than women, this period has also seen a considerable closing of the gender pay gap within the public sector: average pay for men has fallen by more than 10 per cent, while for women it has grown by about 4 per cent.
