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Public sector pay gap biggest at bottom end of scale

Released: 22 November 2012 Download PDF

The difference in average hourly earnings between employees in the public and private sector was highest at the bottom end of the scale in April 2011, according to a report published today by the Office for National Statistics.

This analysis is based on characteristics collected in the Annual Survey of Hours and Earnings (ASHE). These comparisons are inevitably not straightforward because of differences in the types of jobs and the characteristics of employees between the two sectors. Also, large organisations – those with 500 or more employees – tend to pay more than smaller organisations and the public sector has a higher percentage of larger organisations than does the private sector. A number of different results can be derived depending on the methodology that is used to calculate pay differences, and today’s report gives estimates both including and excluding the effects of different organisation sizes.

Including the effects of organisation size and comparing the lowest earners at the 5th percentile – the value at which 5% earn less and 95% earn more – employees in the public sector earned on average 11.2% more than employees in the private sector. Comparing the highest earners at the 95th percentile – the value at which 5% earn more and 95% earn less, employees in the public sector earned on average 10.3% less than employees in the private sector. These differences are likely to be due to the private sector having more jobs paid close to the National Minimum Wage at the bottom of the pay distribution and having very high wages at the top of the wage distribution. Excluding the effects of organisation size, the lowest paid in the public sector earned around 15.1% more, and the highest paid 5.5% less, than their respective private sector counterparts.

Across the whole pay distribution – from the lowest earners to the highest – those in the public sector earned on average 2.2% more than those in the private sector when taking into account different organisation sizes, and 7.3% more when excluding the effects of different organisation sizes.

Regionally, the North East and Northern Ireland had the largest gaps in favour of public sector employees. In London those in the public sector earned less on average than those in the private sector.  When comparing the lowest (5th percentile) earners, Northern Ireland had the largest gap in favour of the public sector, followed by London which also had the largest gap in favour of the private sector for the highest (95th percentile) earners.

A podcast giving more background on this analysis in available on the ONS Youtube channel at www.youtube.com/user/onsstats

Background notes

  1. There is a summary report at http://www.ons.gov.uk/ons/rel/lmac/public-and-private-sector-earnings/november-2012/rpt-public-private-pay.html
  2. Data from the 2012 ASHE published today were not available in time for this analysis, which uses 2011 data instead.
  3. For this analysis the ASHE data are adjusted better to reflect bonus payments paid in the economy using the Monthly Wages and Salaries survey. There are other factors that could influence the pay difference and this analysis does not include other forms of remuneration, for example pension contributions, company cars and health insurance. Also, ASHE does not cover those who are self-employed so it will miss many high-paid self-employed and also some lower paid.
  4. Follow us on www.twitter.com/statisticsONS and on the ONS Youtube channel at www.youtube.com/user/onsstats
  5. National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference. © Crown copyright 2012.

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