Unions’ self-inflicted wounds on benchmarking

The only surprise with the public sector pay benchmarking report is that the unions sound surprised. The findings have had an air of inevitability going back to the time that the implications of the previous benchmarking round sunk in: a nearly 10% jump in public sector pay, on top of what was agreed in the national pay agreements, and all based on research comparing public and private salaries that was never published, and which was soon contradicted by other studies. Brian Cowen has made little attempt to conceal his distaste for the previous round, and the conclusions were set in stone once the report on senior public servants (and the Cabinet) determined that the pension was worth a 15% premium over the private sector, other things being equal. But that’s only the beginning of the unions’ predicament.

The original benchmarking exercise sprang from a widespread feeling among public sector workers than their salaries had fallen behind the private sector. But be careful for what you wish for. Once the methodology was established of linking public and private salaries, one feature of private salaries was bound to creep in: the huge multiple earned by managers and senior corporate staff over the salaries of regular staff. There are various reasons for this: a sense that managerial jobs are risky and demanding, they may involve some equity participation, and the fact that once you’ve achieved a certain level in the pyramid, you can easily hop somewhere else so it takes a good salary to keep you in place.

So for the unions to have demanded — and received — a link between public and private pay scales and then to turn around and complain that ordinary staff are getting no raises (excepting those still coming in the regular pay agreements) while senior civil servants get huge raises: well, that’s the Trojan horse that they let into the system in the first place, since that’s what private pay scales look like.

It’s not clear where things go from here. Bertie and his Cabinet and his senior civil servants are still getting their pay increase, deferred only by a year, but are also in charge of negotiating the pay from the government side of everyone else in the public sector. The UK government seems a bit better tuned into the political economy of the situation, having apparently rejected two draft reports from the Senior Salaries Pay Board before the one coming next week.

In retrospect, the unions might have wanted to argue that public sector service delivery is fundamentally different from what goes on in the private sector and that contented teachers and nurses are crucial to a healthy society — calling for a more compressed pay schedule than takes place in the private sector. Maybe there’s an argument that the senior officials should take pride in serving their country and not be looking to earn the same as someone at the top of the pyramid in a large corporation. Or should the secretary-general jobs just be opened up to all comers and not just be the conclusion of a career track for the select few who rise that far up the system? In this alternative world, we’d accept paying a million a year to the Secretary-General of the Department of Transport on the assumption that e.g. they would actually tell the Minister about relevant information on their desk.

But we’re a long way from that world now. The unions wanted public sector pay to look more the private sector. Now they have a worst of both worlds situation where the person in the street thinks that all civil servants have pay and conditions like the heads of departments, while frontline public sector workers still feel unrewarded for the important jobs that they do (does anything think that a nurse who braves the Saturday night shift at A&E is getting enough money?) In the short-term, another huge headache for the government in 2008.