Tuesday, July 07, 2009

Should Public Services be cut?

Thanks to the frothing at the mouth madness of the bonus-crazed profit seekers in the private financial corporations we have a massive national debt standing at 47% of NDP. Great. So Govt needs to rein make means massive public spending cuts. Tories and Labour have been having a pseudo-debate about how much each is and isn't going to cut. Also great.

So public sector pay is to be frozen. Private sector jobs have been lost in the recession. Should public sector pay rises and jobs therefore go too? Is this fair? Or are public sector jobs underpaid anyway in comparison with the private sector? Polly Toynbee thinks they are.

So we go looking for some facts, and find some on the site of the Chartered Institute of Personnel and Development (CIPD). It was the nearest I could get, but dates back to 2005. Probably as good as it gets, because it takes a couple of years to process the data.

First, 1998-2005 the number of people employed in the public sector (PubSec) rose by 11% and those in the private sector (PrivSec) by 4%. Some of this is acounted for by a phase of the cycle - public jobs tend to lag behing private, then catch up. This was the catch up cycle.

Since the late 1990's earnings in PubSec rose by 4.5%, PrivSec by 4%. Not much of a difference.

PubSec wage bill took 37.2% of National Income in 1999, rising to 42% in 2006/7 - the product of more numbers and more wages.

In 2004 the average PubSec workers earned £27.6 per week less than PrivSec.
However, the median PubSec workers earned £12 per week more than PrivSec.

This difference is due to the fact that private sector pay is more divergent, with greater numbers at the extremes of high and low pay.

At the highest extreme, the top 25% of PrivSec (executives &c) earners are clearly better off than their PubSec equivalents, although the PubSec are doing their best to catch up and pay their top dogs fat cat salaries. IDS finds that a grade 5 civil servant gets 22% less than his PrivSec equivalent, and a Grade 2 gets 65% less.

So there we have it. It's all very complex, and I have simplified it as much as I could. There is much more data to be taken into account, but so far there is no real evidence that the public sector is significantly overpaid.

Classical Keynesianism argues that Government should borrow to keep them in public service. Culling the Civil Service (much as anyone who has had anything to do with them would like to do so) will just increase the unemployment total, the social security bill, crime and mental and physical ill-health.

It all depends on what they do and how efficiently they do it. There would be an enormous benefit to the country if the idiot high ranking Civil Servants who are blocking development of a decarbonised economy were to be removed from office. We can dream.

The main gain would be to improve efficiency. The way to do this is to reinstate the old Suggestion Box, where sharp end workers can continuously modify and improve the efficiency of what they to. There must be thousands of lowly Civil Servants who are plodding along every day doing stuff that they know full well is pointless and inefficient. Their suggestions could improve efficiency enormously. Successful suggestions would be rewarded. It would improve their health and well being, since it would empower them. Marmot has found that powerlessness in the Civil Service is a cause of ill-health.

So - keep the public services going through the recession, but make them more efficient through grass roots empowerment.

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