Recruitment and retention in higher-paid public sector jobs is suffering due to a fall in real-terms pay over the past 15 years, according to the Institute for Fiscal Studies think tank.
An IFS report, Pressures on public sector pay, found that many senior positions have seen their pay slip dramatically relative to lower-paid counterparts.
Pay for the average doctor, for example, has slipped from the 95th percentile of hourly pay in 2007 to nearer the 90th. Average teacher pay has fallen from the 87th percentile to the 81st percentile over the same period.
Lower-paid workers, meanwhile, have not seen their relative position in earnings distribution decline to the same extent – with the exception of junior police officers, whose pay fell from the 34th percentile in 2014 to the 26th last year.
Public sector pay
The think tank said that while public sector pay rises often make headlines, there is less focus on the structure of pay.
“Getting this right is also vital for the public finances and for the delivery of public services. And in many parts of the public sector, both the level and structure of remuneration are not fit for purpose,” the report said.
It found that increasing pay in line with forecast annual earnings growth could add around £6 billion a year to the public pay bill by 2028-29, while closing the gap in earnings between public and private sector workers would cost £17 billion.
Chancellor Rachel Reeves confirmed that public sector workers would receive a pay award of 5.5-6% next year, following recommendations from independent pay review bodies.
IFS research economist and co-author of the report Magdalena Dominguez said recruitment and retention continued to be “common concerns” for many public services.
“The teacher vacancy rate is twice the rate it was pre-pandemic. The leaving rate of prison staff was 13% in 2023, and there is huge churn in the senior civil service,” she said.
“In the NHS, there is an increasing reliance on international recruitment to fill posts. These challenges mean public sector pay will need reforming and, for some, increasing in the coming years.”
The think tank pointed out that public sector pensions tend to be far more generous (and expensive to the public purse), adding that there is an argument for rebalancing remuneration away from pensions and towards pay.
Andrew McKendrick, research economist and co-author, added: “Public sector pensions remain far more valuable than those in the private sector, but significant numbers of lower-paid staff miss out as they cannot afford to make the required employee contributions.
“Gaps in pay between the two sectors are often bigger, and recruitment problems worse, for higher-paid groups such as judges and senior civil servants.
“Government needs to structure remuneration to make sure it is getting the right people in the right roles to help deliver public services. That might mean carefully rebalancing away from pensions and also towards higher-paid professions.”
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