Context is all…
This week the UK’s Trades Union Congress (TUC) has been meeting in Manchester. And they are an angry group. The coalition government’s austerity measures are expected to lead to 600,000 public sector job losses, as well as pay freezes and pension reforms over the next five years. The TUC warned of a “darker, more brutish” society and called the Government the “demolition Coalition”.
The TUC is probably the closest thing that the UK has to a Marxist party. I’ve wondered this week how many of the semi-comic TUC members have ever delved into the delights of Das Kapital in all its glory. Certainly Bob Crow the transport union leader, seems full of the “workers of the world, unite” rhetoric, but I doubt that he’s read a book in his life, let alone Das Kapital. Crow happily occupies the space between pond-life and night-club doorman, yet is a scarily powerful force in deciding whether the real workers of the world are able to get a train or a bus to their workplaces.
He was heard commenting at the Congress that having Bank of England Governor Mervyn King speak to the TUC was like Christians inviting Satan to preach their Sunday sermon, adding that the £300,000-a-year Guv’nor has a chauffeur-driven car. I’m not entirely sure of the relevance of the chauffeur driven car to his attack, but I presume it is an attack on all “Capitalists”, each and every one of whom have chauffeur driven cars. (So far I’ve managed to miss out on this perk of the free-market economic model, but I will look into it). As an alternative to listening to Mervyn King, Crow said he would be listening to a Colombian trade unionist talk about the oppression of workers in his country, where union membership is illegal, and who have the constant threat of jail hanging over them. A sad story I’m sure, but a far cry from the world that the members of Bob Crow’s union occupy.
In one sense it disappoints me that I am even writing about Bob Crow, as it means that I have paid attention to the verbal cow pats that he produces so readily. Anyway, in a wonderfully juxtaposed piece of irony, the Office for National Statistics has published a report this week that identifies that the real victim of poor worker’s rights in this country is the average man or woman working in the private sector. Their report found that full-time public sector staff earned an average of £74 a week more than those in the private sector. Once employer pension contributions were included, the gap rose to £136, illustrating the generous pay-and-perks deals enjoyed by local and central government workers.
In its September Economic and Labour Market Review, published yesterday, the national statistician reported that the average weekly salary for public sector workers in April last year was £539, compared with £465 in the private sector. The difference was more stark when pensions were included because fewer than half of the private sector workforce were enrolled in a retirement scheme, compared with nearly all in the public sector – many of which are taxpayer-subsidised final salary schemes paying two thirds of working income for life. Including employer pension contributions, the total average remuneration package for the public sector was worth £615 a week and £479 for a private sector worker. Mark Littlewood, the director-general of the Institute of Economic Affairs think tank, said the report illustrated “just how preposterous” the TUC’s claims were.
“The idea that the public should rally around these ‘oppressed’ workers is ludicrous,” he said. “Why should their higher salaries be paid for by waitresses and hairdressers? An attack on public sector pay is not an attack on the poor but the privileged.” Mr Littlewood said the research would have been even more depressing reading for private sector workers if job security had been included. ”The likelihood of losing your job in the private sector is much higher,” he said. The number of public sector workers swelled under the past Labour government from 5.2 million to more than six million.
In response to the report from the ONS a chap called Adam Lent, who holds what is surely a oxymoronic job as “head of economics” for the TUC, said: “You can’t make direct comparisons. The public sector has many more professional and highly skilled workers within it than the private sector. Averages simply do not tell us anything useful.” For the TUC’s sake I hope they aren’t paying this guy very much.
Wrapped within all this comic stupidity, lies a very scary problem, which the TUC is just a part of. I watched Iain Duncan-Smith, the work and pensions minister, on the Jeff Randall segment of Sky News on Tuesday evening. He highlighted some very scary statistics about the nature of state dependence that exists in parts of British society. There are close to 4 million households, containing 5.4 million adults, in which no-one has a job. Amongst these numbers, 1.9 million children live in homes where no one works – fuelling fears that the benefits culture will be passed from one generation to the next. In total, 7.3 million children and adults aged under 65 live in workless households. A further 2.5 million are deemed currently unemployable and are receiving incapacity benefit. A staggering statistic of this particular roster is that if you have been on incapacity benefit for more than a year, you are statistically more likely to die, than to find a job.
In the face of these “headwinds” one solution is to artificially create more public sector jobs – which has typically been the Labour government strategy over the years. This approach has some merit in the short-run, but the artificial creation of these “non-jobs” leaves both a financial and a social burden which is ill-advised over the longer-term. In Northern Ireland for example over half the working population are either directly or indirectly employed within the public sector. This is a legacy of past governments creating jobs in the province as part of a solution to the Troubles. There is now a clear culture of State dependence, and an effective crowding out of private sector job creation that will be hard to fix.
When William Beveridge produced his report in 1942, which was the forerunner to the first creation of a true Welfare State, he identified five “Giant Evils” in society: Want, Disease, Ignorance, Squalor and Idleness. Social security or “insurance” as he called it, was only one part of a “comprehensive policy of social progress”. Policies of social security, he said, “must be achieved by co-operation between State and individual” and the State “should not stifle incentive, opportunity, responsibility; in establishing a national minimum standard of living, it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family”.
In this last point the State has failed over recent times. The context that has been created has actually perpetuated some of the Giant Evils that Beveridge was looking to root out of society. I’m firmly of the view that everyone, including those falsely claiming incapacity benefit, actually want to better the situation for themselves and their families given the opportunity to do so. It will be very hard, if not impossible, to force people to change their behavioural patterns overnight. A context change is required, and the current deficit crisis is as good a reason as any to get back to a social security framework that is closer to Beveridge’s concept than Bob Crow’s.
11 Responses
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Deirdre hoey says:
Let the shake up begin! No more whinging! (whinging is just anger forced through a small hole)
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JB says:
Delighted you’ve written this… I’ve been more than mildly perturbed by this exact issue all week. Completely agree with everything you’ve written however, one important thing seems to have been overlooked in everything I’ve read on the issue. We all know the limited nature of statistics, and their potential for being manipulated. The TUC’s ‘economics’… expert (?)… is right to question the benefit of the staggering average wage differential between public and private sector workers however, he should probably refrain from encouraging any closer inspection.
It is a widely percieved suspicion that senior union officials in the public sector have spent most of their time lining their own pockets in wage negotiations with superiors, rather than boosting average wage levels for their lower ranked ‘comrades’. This week’s Sunday Telegraph revealed that 9,000 pubic sector workers earn more than Prime Minister David Cameron’s £142,500 annual salary. In fact, 38,000 public sector employees earn more than £100k.
Rather than compare average wage levels, I think we should compare median wage levels. Were we to do so, I think we might find that the comparison would be more equal, or even in favour of the private sector worker. You might think that this would then bolster Bob Crow’s socialist gospel but, allied to the average wage comparison, it would highlight how Bob and his hypocritical cronies have spent their time looking after #1 while convincing the trusting workers of the world that the big bad capitalist pig is bleeding them dry. Wake up comrades… its your corrupt union leaders who have screwed you, not the public sector.
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Adam Lent says:
Never let the facts get in the way of a good piece of personal invective.
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Aidan Neill says:
Mr. Lent – point taken in regard to the statistics. Where I quoted you however was on the notion that “public sector has many more professional and highly skilled workers within it than the private sector”. Care to walk me through that particular line of argument?
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Not in absolute terms obviously but the public sector has a higher proportion of people working in skilled jobs – teaching, healthcare, social work – that require higher level qualifications. In addition, the public sector tends to employ a lower proportion of people working in low pay jobs that concentrate in sectors such as hospitality, food processing and retail. As a result, average pay will, as a matter of course, be higher in the public sector than the private sector. That is why the ONS themselves say that direct comparisons of the two sectors without taking into account their different compositions tell us very little. But to say otherwise serves a current political purpose and that is why the facts get ignored.
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The political purpose is served both ways as required. Where my fundamental issue lies is that the public sector is too large for the size and direction of the British economy, and in that context your organisation isn’t served well with the likes of Bob Crow or Len McCluskey given a platform to shout (or heckle) from. Both hark back to some Victorian “oppressed worker” mode that is simply outdated.
We have over-indulged in the last 50 years since Beveridge developed his welfare state concept; universal healthcare, pensions, public funded fire departments etc. are all luxuries of advanced economies. Without private sector growth and investment they are luxuries that can only be indulged by increasing the size of the deficit – and rolling up the ensuing interest expense that will come with it. This is something which recent governments were willing to do – and which my children and their children will pay for (sorry to use that line, but it’s true).
I invest in and am involved in running 2 small businesses in the UK – I hire people out of my own pocket. If the economics of these businesses work then I can hire more people, if they don’t then I lose money and will very likely have to lose employees. While there are many many highly skilled doctors, nurses, teachers and social workers working in the public sector who play a critical role in the functioning of our society our ability to pay them high wages (and they should be paid high wages) should be down to whether we can afford them.
Currently we can’t, and hopefully frontline public sector workers won’t be the ones affected. But they will – unions will seek to overprotect all of their workers (especially the real jokers) with poor consequences. BA’s cabin crew need to understand that their business only exists because people are willing to risk their pension funds (for example) by investing in it. Current union involvement there is only serving to make it more likely that the business goes into administration, at which point not only will the cabin crew not have travel perks, or nice pensions…they won’t have anything at all because the kitty will be empty.
Much of the work that the TUC does is very valuable, but the context seems to be lost. I concede that as much as Bob Crow doesn’t make a great advocate for the public sector, or unions in general, the Bob Diamonds or Fred Goodwins of the world don’t make good speakers for the private sector. Fundamentally, there needs to be a better dialogue between public and private sector, between worker and employer. And nobody is well served by those representing either party.
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A little more context:
Between 2000 and 2010, had government’s annual expenditure just kept pace with inflation, the budget would have risen from £343 billion to about £450 billion. In the event, Alistair Darling spent £669 last year and Mr Osborne will spend £697 billion this year. In real terms, over the past decade, there has been a 50 per cent increase in the state’s outgoings.For those who insist that George Osborne is about to slash spending to the bone here are some inconvenient facts. If he delivers all his planned savings, £81 billion over the next four years, spending on public services in 2014-15 will still be higher in real terms than in 2006-07. Have a look at page 17 of the Treasury’s Spending Review 2010. It’s all there.
Never mind that Labour added about 800,000 workers to the public-sector payroll, forget that interest charges on our near-£1 trillion of debt will soon be costing the Exchequer £1 billion a week (putting it on a par with annual defence spending).
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Aidan,
Labour ran up a structural deficit while in power which they were trying to correct through various cuts and efficiencies – arguably they were not doing enough but efforts were being made. The origins of this are partly to do with dodgy HMT growth forecasts and Gordon Brown playing reasonably fast and loose with his own fiscal rules. But the deficit was not out of control and debt was low.
What made the situation incalculably worse was the Crash and recession which wiped out a very significant proportion of tax revenues while demands on welfare rose as unemployment rapidly increased. You can blame Labour for not doing enough to guard against systemic risk in the banking sector (and I do) but the resulting fiscal crisis is not the result of them over-spending.
It should also be kept in mind that the size of public spending relative to GDP is now 45% which puts us around the middle of the table for OECD nations. And economic succes does not correlate at all to size of the state one way or another.
As for the claim that spending will only be back at 2006/07 levels in real terms: that sounds good but ignores the fact that three huge areas of spending have been entirely or largely protected: health, education and the state pension. So some areas are facing very large cuts which will take them back well beyond 2006/7. It’s Table 1 in the Spending Review that gives you a better indication of what the cuts will feel like and that doesn’t even include the £19 billion coming off welfare.
I absolutely agree that the deficit has to be brought down but the key judgement is the pace and means by which you do this. You may fear the effect the deficit may have on your children and grandchildren but if we make the wrong calls on this and end up damaging growth and the capacity of the UK economy to compete globally, they will still suffer. There are no easy answers in my view and I am highly dubious of anyone either from right or left who thinks there are.
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Hmmm…
All very conciliatory of you Adam but, while you’ve danced nimbly around the question of average public sector wages versus private sector wages, you’ve avoided my question regarding median wages.
How come the hierarchy within the public sector, who have basked in the warmth of extortionate income hikes for so many years though the boom, are now trying to beat the drum for the common man (who will feel the true brunt of the spending review) when they sacrificed the same ordinary hard-working individual at every wage negotiation in the good times, in order to line their own pockets…. I honestly want you to prove me wrong Mr Lent – show me that median wages in the public sector are comparable to that of the private sector. Please show me that your socialist model has looked after the vast majority of people better than the capitalist one has… Well..?
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JB,
I think you are confusing the pay of senior trade unionists and senior public sector workers. The former bears no relation to the outcome of any negotiations conducted on behalf of the latter. One group is paid by trade union members, the other by the taxpayer. Maybe I’m missing your point.
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