Closing the public/private sector gap needs more than rhetoric

“Why can’t a woman be more like a man?” laments Professor Higgins in the film My Fair Lady. Similarly, the government, in its Modernising Government White Paper in 1998, asked why the public sector could not be more like the private sector. The public sector, it said, should be less risk averse and more performance and customer-oriented like the private sector.

Yet the government’s stance has proved just as futile as Professor Higgins’s. A new book, Rethinking Reward*, shows that, when it comes to human resource management (HRM), the public/private sector divide has widened over the past decade, not narrowed.

To start with the basics: pay in the private sector has become largely determined unilaterally by management. In the public sector, pay is determined either by management/union bargaining or by pay review bodies, the independent committees that make recommendations to government. In the past decade, we have seen yet more pay review bodies: a new body for prison officers was created in 2001, while the nurses’ and other health professionals’ review body was extended to virtually all NHS staff in 2007.

Grading structures increasingly differ too. Pay spines based on analytical job evaluation with service-related increments and separate annual cost of living and performance increases (rather than the two being rolled into one) are hallmarks of the public sector. However, the private sector is increasingly adopting broadbanded pay structures – without incremental points – and an annual increase that intertwines performance and cost of living, often through non-consolidated variable payments.

Perhaps the most marked difference in HRM between the public and private sectors is with pensions. Defined benefit – or final salary – provision is increasingly restricted to the public sector, while defined contribution schemes are essentially a private sector phenomenon. Furthermore, over the past decade, the number of members in private sector schemes declined by more than one million, while the number of members in more favourable public sector schemes rose by nearly two million.

On equality, too, the difference has been increasing. New duties – first on race, then disability, and most recently gender, have been imposed on the public sector but not on the private sector. At the same time, the number of public sector equal pay claims has risen dramatically.

Industrial action is increasingly a public sector phenomenon. In 1998, there were 88 stoppages in the private sector and 78 in the public sector. Fast forward to 2007, and there were just 52 stoppages in the private sector compared to 173 in the public sector. Other differences include the pay levels of chief executives, which have soared in the private sector the use of national pay scales and national agreements in the public sector, but much looser and more localised pay frameworks in the private sector and a more female, part-time, older workforce in the public sector.

Governments of all political persuasions seem to assume that the private sector is more efficient and effective than the public sector, but 50 years ago the government held up the public sector as a model employer. It provided workers with security when they were sick or retired, with fair pay, and until 1983 “fair standards of wages and working conditions” for those working for private sector organisations contracting with government departments.

The time has come when the government should stop spitting in the wind. Making the public sector more like the private sector needs more than assertion. There is no silver bullet and, as events in the City demonstrate, private sector practices can have unfortunate and unexpected outcomes. The government needs to recognise the differences between the sectors, and that in reality, public sector leaders have only limited freedom of action to bring about change.

Sue Corby, professor of employment relations, University of Greenwich

* Rethinking Reward (2008), edited by Susan Corby, Steve Palmer and Esmond Lindop, Palgrave Macmillan, £26.99 ISBN 978-0-230-53273-1

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