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Will pay rises make the public sector more attractive than the private sector?

Will pay rises make the public sector more attractive than the private sector?

The UK Government has announced above inflation public sector pay rises which will benefit nearly 900,000 UK workers. Teachers will receive the largest rise, at 3.1%, followed by doctors and dentists who will see a 2.8% increase. Other public sector workers including police officers, the armed forces, and senior civil servants will also see increases in their annual wage. But will the highly publicised increases actually help, and will they make a career in the public sector more attractive?

The pay rises themselves are among the biggest seen in the UK’s public sector for some time. The Department for Education declared it the “biggest pay rise in fifteen years” for teachers, pointing out that new teachers in particular will be eligible for an even larger 5.5% increase, adding over £1300 per year to a starting salary. Although nurses are not covered by the announcement, the Government said a separate agreement provides a 4.4% increase on average for nurses. Non-senior civil servants will also see a pay rise of between 1.5% and 2.5%.

The above inflation pay rises point to a notable change in policy. Just a few years ago, public sector pay increases were capped at 1% during what many described as the ‘austerity’ years. Except for 2015 and 2016, the rate of inflation in Britain has been above 1% in recent years, meaning that public sector employees have experienced real-term cuts in their wages. In that context, a pay rise of this nature suggests a substantial improvement in the value of a public sector job. The Chancellor, Rishi Sunak, described the rise as a reward, saying that the first half of 2020 has shown “that our public sector workers make a vital contribution to our country and that we can rely on them when we need them.”

However, data from the Institute for Fiscal Studies (IFS) show that there’s still some way to go before public sector wages achieve parity with private sector salaries. In November 2019, the IFS reported a substantial difference between public and private sector pay, with private sector workers continuing to earn more than their public sector counterparts. In response to the pay rise announcement, the Director of the IFS, Paul Johnston, tweeted that “Public sector pay [is] at its lowest level relative to [the] private sector for a very long time”, describing the pay rises for the public sector as “needed”. Johnston also said that “Public pay will grow faster than private” pay this year, a known trend during recessions.

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