Monday, July 18, 2011
GETTING BEHIND THE FACTS: THE PUBLIC SECTOR VS THE PRIVATE SECTOR
At the time, I was keen to emphasise that it was not a case of “private sector good, public sector bad” but it is important to realise the scale of the problems facing the Welsh business community that has been over-dependent on public sector jobs for the last decade, often at a cost to improving the performance and potential of the private sector in Wales.
And there continues to be a debate on the differences between the sectors, although it was a debate that was unfortunately described as ‘sterile’ by the Welsh Government earlier this month.
Yet, it is clear that understanding these differences can help us to begin to realise how both sectors can actually learn from each other.
Take, for example, the latest report on public and private sector pay from the Office for National Statistics, which indicated that the difference in average earnings across the UK between employees in the public and private sector has increased since April 2007.
The headline analysis showed that, in April 2010, public sector employees were paid, on average, 7.8 per cent more than private sector employees. That seems to blow, out of the water the myth that public sector workers receive better benefits but lower pay.
Such simple statistics do hide the fact that, over the last two decades, much of public sector has been happy to outsource most of its low paid menial jobs to businesses. Consequently, there is bound to a higher concentration of high skilled and highly paid jobs within the public sector.
In fact, if you dig into the data, there are some interesting statistics that emerge to show that both sectors need to re-assess their employment patterns, especially as the relative importance of the public sector decreases over the next few years.
If, for example, the link between qualifications and pay is examined, then the statistics reveal that those who have a degree in the public sector actually earn 5.7 per cent less than those in the private sector in 2010. This may be surprising as 53 per cent of those currently employed in the public sector had a higher education qualification as compared to 32 per cent in the private sector.
There are certainly questions for both organisations and policymakers with regard to this one statistic.
Why, for example, do graduates go into the public sector even though the pay is lower? Why does the private sector, even taking into account factors such as outsourcing, perform so relatively badly at attracting those with degree qualifications into the workforce?
It could it be argued that if we are to be spending money producing the graduate talent of the future that there should be greater policy interventions to ensure that they are attracted into the productive side of the economy, namely the private sector?
If we examine the evidence on gender, then the research shows that female employees in the public sector earn considerably more, on average, than their counterparts in the private sector.
One explanation for this is that a significant proportion of low paid jobs in the private sector, such as cleaning and catering, are carried out by women.
Of course, whilst women still perform lower paid jobs, such as caring and clerical work, for public employers, there are also a high proportion of women employed in professional, higher paid occupations, such as nursing or teaching.
The data showed that 28 per cent of women in the public sector in 2010 were employed in high skill jobs, compared with 18 per cent in the public sector. This suggests that the so-called glass ceiling is not merely confined to boards of directors, as suggested by the recent review into inequality by Lord Davies of Abersoch which revealed that only 5.5 per cent of the executive directors within the UK’s top 100 companies were women.
It does not take a genius to work out that if less women are being employed within high skilled jobs in the private sector, then fewer will make the step into boardroom.
However, in addressing this, government must be careful not to impose quotas on companies as this simply would not work. Instead, a greater cultural change needs to be encouraged within our business community that encourages the leadership development of women in middle management.
Businesses can clearly learn lessons from the public sector in this regard, especially as research suggests that more diverse boards take better and more responsible decisions.
Therefore, understanding the differences between the private and public sector is not a sterile debate at all.
In fact, it is important not only in developing organisations in both sectors but ultimately the Welsh economy if we get better boardrooms and more highly skilled graduates into businesses.