Public and private sector pay

 As ever the IFS is brilliant on this, from a July 2024 paper, by Cribb and O'Brien. 

1. The overall picture is lagging public sector pay since 2001.

"And taking the long view, real public sector pay at the end of 2023 was still 1% lower than its level at the beginning of 2007, almost 17 years earlier. Real private sector pay was only 4% higher over the same period."

2. Interestingly, public pay has varied an awful lot, with low paid public sector workers doing relatively well.  

 

3. and different professions faring differently. 

IFS say

"Figure 6 shows how pay has changed for some major (and high-profile) public sector occupations: nurses, doctors, teachers and educational assistants compared with the public and private sectors as a whole.5 For comparability (particularly due to discontinuities in NHS England data), we focus on the period since 2010. 

Figure 6 shows that pay for most of these high-profile public sector occupations has fallen by more since 2010 than the average for public sector wages. The one exception is educational assistants, a relatively lower-paid occupation, whose average pay grew significantly faster than even average pay in the private sector. That pay growth for teachers, doctors and nurses lagged behind the public sector average is not necessarily surprising due to the pay compression in the public sector documented in the previous section, as these are among the better-paid public sector occupations. The reductions in pay for teachers in the 2010s were particularly large and slightly larger than implied by pay scales, reflecting the fact that the teacher workforce has become slightly less experienced (and therefore less well paid) over time.6 This has happened in other occupations too; for example, there have been significant expansions in the number of doctors over time, leading to increases in the share of doctors who are younger and therefore less well paid (General Medical Council, 2023). 

 

The labour market: December 2024 release

1.  I have been worried for some time that the UK labour market has been impaired following the disruption from Covid and the like.  To me, there is a risk that U* has risen to more than 4.5% the BoE has estimated (their estimate is on p. 13 of the November MPR).

2. So the labour market data will be crucial on this.  What does it say? Fkigure 4 of the release shows a blip up 

"Annual average regular earnings growth for the private sector was 5.4% in August to October 2024 (Figure 4). This was up on the previous three-month period (4.9%) and last higher in March to May 2024, when it was 5.6%."

3. What are we to make of this blip up?  I don't want to read too much into one month, but it's concerning.  The ONS does say "This growth rate is affected by a small decrease in the October 2023 estimates, which has caused a slight base effect.".  It turns out that wages fell in October 23, so there is an effect here, but this is one month in a 3month on 3 month measure.

4. Vacancies have continued to fall, and are now roughly at the 2019Q4 pre-pandemic level.  Our previous work, however, showed this was inflationary.

5. this gives a VU curve like this

which uses overlapping months.