27.03.12

Public and private sector pay gap around 8 per cent in 2011

 

The difference in average hourly earnings between employees in the public and private sector stood at around 8.2 per cent in 2011, according to an article published today by the Office for National Statistics.

The analysis is based on characteristics collected in the Annual Survey of Hours and Earnings (ASHE) and the Labour Force Survey.

Since 2002 the size of the pay difference has fluctuated, rising from 2002 to 2005 and then falling by 2007. In 2007 the pay difference was estimated at 5.3 per cent and so in 2011 it is estimated to be 2.9 percentage points higher.

There are other factors that could influence the pay difference and this analysis does not include other forms of remuneration, for example pension contributions, company cars and health insurance. Also, ASHE does not cover those who are self-employed so it will miss many high paid self-employed and also some lower paid. The timing of the survey in April means that only bonus payments related to April are included, outside of the main bonus season which is normally January to March. These factors would account for at least some of the difference.

The article also looks at the differences between the types of jobs in the two sectors and the characteristics of the people within them, showing that:

  • The public sector is made up of a higher proportion of higher skilled jobs – widening over the last decade as lower skilled jobs have been outsourced from the public to the private sector.
  • The public sector consists of a higher proportion of older employees and earnings tend to increase with age and experience
  • The public sector workforce contains more people with a degree or an equivalent qualification, 40 per cent in 2011, compared with 25 per cent in the private sector
  •  The gap between the lowest and highest earners is higher in the private sector with the top 5 per cent (95th percentile) of earners paid around 5.7 times more than the bottom 5 per cent (5th percentile). The gap is 4.5 times in the public sector.

Note: Comparisons in this analysis are inevitably not straightforward because of differences in the types of jobs and the characteristics of employees in the two sectors. The above estimate makes allowance for these differences as far as is possible. For consistency over time, these estimates assume employees of those banks reclassified to the public sector in 2008 were in the private sector throughout.