Who earns more?
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Thank you for downloading this week's More or Less podcast. Here's Tim Harford.
Hello and welcome to More or Less, the top gear of Radio 4 programmes about numbers. This week, the National Secular Society and the Catholic Church clash over how many Catholics regularly go to Mass. We ask whether a 28-year-old woman should be able to run a half marathon faster than a 52-year-old man. More importantly, are your trousers lying to you? Just staying naturally, see? See, if I relax, it's 36, but if I breathe in, we can get down to 35.
Yes, but you're going to need a 36.
But first, on Tuesday, the Office for National Statistics published their monthly economic and labour market review. Bear with me, this is about to get interesting, because it's all about that age-old statistical question, who's more hard done by and underpaid, private sector workers or public sector workers? The ONS review contains a chapter which tries to answer that question.
Its first paragraph says... Some commentators have argued that taking account of pensions as well as pay, public sector employees in the UK receive better remuneration than their counterparts in the private sector. This article analyses the evidence from the annual survey of hours and earnings of the Office for National Statistics and finds that the answers are more complex than such claims suggest.
Predictably, perhaps, given these straightened times, the report triggered a wave of headlines and comments, such as this from the Daily Telegraph.
Myth of the underpaid public sector worker. And this from the Daily Mail. The calculation will pile pressure on the coalition to rein in the cost of the public sector, fattened by 13 years of Labour government, through pay freezes, job cuts and reform of the pension system.
But did the stories reflect the complexity the ONS's reports authors wanted to get across? I spoke to Sarah Levy, head of pensions analysis at the ONS and the report's lead author.
I think it's very difficult in newspaper coverage to look in detail at the sort of issues that we're looking at. It's a very complex area and not one that is easy to summarise.
Your main measure is something called total reward. So what does that mean?
What we've done here is we've looked at both gross pay and the employer's pension contribution. Because a lot of people, if you ask them how much they earn, they're likely to quote you their gross pay. But in fact, the employer pension contribution can be a very significant part of overall remuneration. So we've put the two together, gross pay plus employer pension contributions, to create a measure called total reward.
Now, you said this defies an easy summary, but let's try for an easy summary. So what did you find? Then we can talk about the details later.
OK, well, what we found was that if we look at all full-time employees, the basic conclusion is that the public sector is better off than the private sector. But we then realised that, in fact, that was not really a like-for-like comparison because the total reward is made up of both gross pay and pension contributions from the employer, and for the private sector, A large proportion, 57% of full-time jobs, don't actually have any pension contributions, whereas in the public sector that's only 10%. So if we were to compare all... full-time employees we would not be comparing like with like so what we then did was to exclude the people who don't have any pension contributions so that when we're comparing total reward we are getting closer to a like for like measure and we then found a completely different result which was that in fact the private sector was better off than the public sector
How does the ONS define “total reward” when comparing public and private sector pay?
I have to admit, when I saw that you'd done that, I was a bit baffled. If you haven't got a pension, you haven't got a pension. Isn't the whole point of many people's worries about public sector pay that they say, well, these public sector jobs come with great pensions, a lot of private sector jobs don't have pensions. Why would you just say, well, let's just not count the private sector jobs that don't have pensions?
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