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Can we afford a living wage in the public sector?

The leader of Britain's largest public sector workers union, Dave Prentis, has said the Labour manifesto should contain a commitment to pay all public sector workers at least the living wage. This would be a bold step for Labour and would determine much else in their strategy on pay. But if Labour made this commitment what would be the quid pro quo from the public sector unions?

For a living wage to be meaningful for the poorest workers the unions would have to agree not to seek to maintain  pay differentials, else pay would ratchet up. A key question would then be whether this was sustainable. It would involve a self-imposed pay restraint for workers up the pay order. Is Dave Prentis willing to persuade his members of such a restraint? Some might doubt it as he is already threatening future industrial action on pay. It is difficult to see how he can square this circle.

He might argue that increased pay for public sector workers would not be inflationary and would not therefore affect the living wage. This would be most unlikely. Public sector pay increases have major impact on costs of providing services; somehow these costs would have to be met by either increased government subsidy, further cuts in services or increased taxes or charges. There is, however, one seed of an argument that might just hold.


Whilst private sector labour costs have increased recently,  public sector labour costs have fallen. The ONS statistics show the growth in labour costs per hour in the private sector was 1.4 per cent in the third quarter of 2012, compared with -1.0 per cent in the public sector. This in part reflects an increase in hours worked per employee in the public sector, compared with a year earlier.

This increased productivity in the public sector may provide a little wriggle room for modest increases in pay that would enable a living wage in the sector without a ratchet effect. But Prentis would still need to prioritise the living wage for the lowest paid public sector workers. If he is willing  to do this, would his members be also in accord?

The problem of outsourcing low paid jobs

It is scandalous that a living wage is not paid in the public sector - it is equally scandalous that anyone should be expected to work for less than a living wage in any sector. We must move to fairness in pay and this means in both public and private sectors. This is particularly so because most low paid jobs are outsourced to the private sector. Thus the private sector has a higher proportion or workers at or around the minimum wage and in particular women.

There must therefore be a commitment that no contracts can be awarded unless at least the living wage is paid. There should also be commitments to training and promotion. In this way a living wage can also be part of a programme of developing better services through a more productive workforce.


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