Figures released today from the ONS suggest that public sector earnings are rising faster than those in the private sector. In fact, the reverse is true and the numbers are a statistical quirk
You could easily be misled at the moment into thinking that public sector pay is rising quite a bit faster than private sector pay because, on the face of it, that is what the ONS data shows. But the fact that the data appears to stand reality on its head is a test for the fainthearted.
The latest Average Weekly Earnings figures from the ONS, published today, show that total earnings in the private sector rose by 1.9% in the year to August 2012 while total earnings in the public sector (excluding the nationalised banks) grew by 2.4 %. This appears paradoxical, given the pay freeze in the public sector.
Fortunately, this counter-intuitive rise in public sector pay can be explained. It is largely the consequence of a re-classification of 196,000 jobs in further education and sixth form colleges from the public to the private sector. The trouble is that this explanation appears as a footnote to the data and the overall trends could easily be misread.
Last month the ONS explained that the re-classification of these 196,000 teaching and support staff had increased average earnings in the public sector by as much as 0.8%. Their average pay was clearly below the average of the rest of the public sector and removing them has boosted the average for the remainder.
In addition, the re-classification had a downward impact on private sector earnings of up to 0.2%. This impact was diluted as the private sector is so much bigger.
If the effects of the re-classification are put aside, it would be reasonable to suggest that in contrast to the official ONS data, private sector earnings are rising by around 2.1 to 2.3%, while public sector earnings (excluding the nationalised banks and the re-classification) are rising by around 1.5%.
These are my guesstimates. In reality the ONS could tell us these figures. Just as they produce a series of earnings for the public sector excluding the nationalised banks they could produce a series excluding the nationalised banks and the re-classification. It would only be required for 12 months until these effects drop out of the picture.
The ONS ought to move on this because real people in the public sector have not had real pay rises of the order of 2.4% as the data suggests. The ONS figure reflects the statistical consequence of altering the shape of the workforce by re-classification, not real pay trends.
Meanwhile, private sector pay has strengthened in recent months, and this is best illustrated by looking at the rates of growth in regular pay, which excludes the impact of erratic bonuses. In the year to August, regular pay in the finance sector grew by 2.3%, in manufacturing by 2.2% and in wholesale, retail and hospitality by 2.9%.
Public sector earnings growth of around 1.5% is coming from a variety of modest pay rises for different groups. Some pay growth is from the rises of £250 for those earning below £21,000 eg in the NHS. Some pay growth is from the first settlements under the 1% policy eg the fire service from July 2012. While some pay growth is from those areas where progression pay is in place.
There is also a long-term effect of slimming down the public sector workforce. As support staff are removed or outsourced, the average earnings of those who remain tends to rise. This process also has the opposite effect of lowering the average in the private sector.
Alastair Hatchett is head of pay and HR services at Incomes Data Services. This post first appeared on the IDS Eye blog
