On national pay bargaining

Summary

On proposals for public sector regional pay variations

The issue of national pay bargaining was something that trundled along during my entire time as a trade union rep. The two principles that in particular Mark Serwotka and Janice Godrich (both of whom I met) was that people should get paid the same amount of money for doing the same job irrespective of who they were & where they lived. There was also the issue of the costs of pay negotiations. The more negotiations with unions there had to be (because of a fragmented system), the greater the costs to both tax payers and trade unions that formed the negotiating sides.

In the news today, trade unions have reacted angrily to plans for regional pay scales – where people in parts of the country with lower costs of living will end up with lower salaries than those say in London & the South East.

Why are ministers in favour?

Going by the BBC’s Richard Moss, the argument is that the public sector is “crowding out” private sector employers who say that they cannot compete with public sector employers who pay higher salaries that are set nationally. By reducing the pay of public sector employees, the private sector can compete with the public sector – goes the argument. That it might save HM Treasury a penny or two is a beneficial side effect. (Personally I don’t buy that but hey.).

In its little silo, you could say that if there is a limited workforce and high employment, give a policy of trying to move people from public to private sector it sort of makes sense.  You’re giving an incentive for people to move away from the public sector because your pay is effectively frozen, giving a ‘real terms’ pay cut (because inflation devalues your salary over time – hence pay rises).

What’s the bigger picture?

The areas that ministers want to target to stimulate this private sector growth generally have higher unemployment rates anyway. Drawing a line on the map of the UK from North Wales to The Wash that marks out East Anglia big behind & you can see broadly a “north-south divide” as far as unemployment goes. (There will always be anomalies within – such as unemployment in parts of inner city London). So the people are there to be employed, but for whatever reason employers are not employing them.

What are those reasons? (Here are just a few).

Skills mismatch: Is it a case of getting people with the right skills? One of the things the Coalition has been quite good on is its push for apprenticeships. I can’t help but feel Labour’s obsession with the 50% target of getting people into higher education blinded it from other forms of education and training. Hence the problem of high unemployment amongst graduates with high expectations and huge debts. This in part is related to the “Life on a piece of paper” problem – a single route to “success” which I fully subscribed to when I was about 16, threw it out of the window by the time I got to university and actively blogging and posting against it when I entered the world of work. Does the local workforce have the skills & experience demanded by private sector employers?

Poor transport infrastructure: Every time I venture northwards (nearly always on train) I’m always saddened by the dilapidated state of public transport infrastructure. It was only recently that I found out why. A huge amount of transport funding is focused on London and the South East. That’s not to say funding should be transferred – I think it should be increased across the board and made a priority. But I would say that.  Labour missed a huge opportunity to sort this out in a number of cities with the scrapping of tram systems for Merseyside and Leeds. For me these were the casualties of the rapid turnover of ministers under the Blair/Brown years. No one was there long enough to drive these things through to completion and success.

High costs of transport: This is a nationwide problem for me. It’s one thing having the infrastructure, it’s quite another being able to afford it. A season ticket from Cambridge to London costs almost as much as renting a room in London. Are people being ‘priced out of employment’ by the costs of getting to and from work?

Affordable and good quality childcare: Again a significant barrier but in particular for women. Having seen the impact that bringing up young children has had on both former colleagues and on relatives, I wonder how people manage. To what extent (i.e. has anyone got comprehensive robust data) is childcare (&/or the lack of) preventing women in particular from getting jobs? Beyond that, what about formal and informal support networks at community level?

There are many many more.

And your point is?

My point is that the Government is pulling a lever that it has far more control of (i.e. public sector pay) than ones that it has less control over and covers areas that are much harder to tackle. If it’s a cost-saving measure, The Treasury should have the courage to say so and publish the data and the impact assessments demonstrating it in The Budget.  For any MPs out there, it might be worth throwing a few parliamentary questions on the assessment The Treasury has made on the costs & benefits of national vs regional and local pay bargaining in the public sector.

As far as joined up government is concerned, can ministers demonstrate that this idea is not a flash in the pan thing but part of a clear and consistent strategy to deal with unemployment in economically deprived areas.

What about other impacts?

Opponents have accused ministers of a cash grab – saying that it’s a massive transfer of funds from poorer to wealthier parts of the UK. Sentiments such as this one from former Deputy Prime Minister John (now Lord) Prescott have cropped up regularly on Puffles’ Twitter feed. One potential impact is the reduction in spending power as a result of what will be real terms cuts for those in more economically deprived parts of the UK. What will be the impact on those employers that are dependent on demand from such employers? Will this be covered in the Budget’s impact assessments? (Assuming the policy is included). Pay variations may also have an impact on the willingness of people to move out of London and the South East to other parts of the UK – reducing mobility. Will it mean people outside of London and the South East will end up with a second class service as the financial incentive for those most talented points in the direction of the highest paid posts (in London & the South East) for the same job?

What about moving Whitehall out of…Whitehall?

This was muted back in 2009 & regularly crops up every now and again – moving as many non-essential functions out of Whitehall. The costs of transport comes up again and again, despite various attempts at conference calling and video conferencing. One of the things I liked about inter-departmental working in Whitehall was that many of the departments were either within walking distance or a short bus ride away. The technology of video-conferencing was still in its infancy at the time – combined with people generally unwilling to use it. However, the emergence of Skype & other platforms is something that in future may lead to greater use of it if there are a critical mass of people within the civil service willing to run with it.

Large scale movements out of London are not easy – as the BBC has found. The principle of the move to Salford was not a problem – it was the taking of the staff along with them. Anecdotally I’ve heard of ‘integration issues’ between locals and those that have unwillingly moved up from London. I’d be interested to see something more robust on the wider ‘sociological’ issues of moving such a large institution from one part of the country to another. What have been the impacts on say communities, housing, employment, & public services?

To conclude? 

I think there are more effective solutions than variations on pay. The problem is that those solutions are harder to implement and may only show results over a longer period of time. Pulling the lever on variations on pay is one that The Treasury has the greatest control over and is one that it thinks will show the greatest impact on its balance sheet at least in over the shortest period of time. Let’s say ministers defeat the unions over this policy & it is implemented. What are the risks of this policy not leading to increased growth outside London & the South East? What are their likelihoods & impacts? There’s another risk register for you.

This entry was posted in Business economics and finance, Employment and job hunting, Party politics, Public administration & policy. Bookmark the permalink.

3 Responses to On national pay bargaining

  1. I’m really not convinced that regional pay would discourage people from moving out of the South East if they want to. The present situation, where pay is the same irrespective of the relative cost of living in different regions, in effect means that public sector workers in the South East have lower real incomes than their equivalents in other areas. Where is the migration out of the South East that this should cause? I don’t see it happening, do you?

  2. prestolee says:

    I wish those arguing against the proposals would be clearer on their views with regards the existing arrangements such as Teachers Weighting for Inner and Outer London, MoJ paybands based on hotspots and SE, Prison Service’s Locality Pay which elevates pay for local areas ranging from Aylesbury to Brixton.
    Would they prefer genuine level pay across the country – perhaps a boon for those in the north who’d see their pay as the London weightings were shared out. Or would they argue that the cost of living in certain places mandates higher pay; though surely local salaries and cost of living are inextricably linked.

  3. Andrew Bower says:

    I’m afraid I didn’t reach the end for the reason that I find the whole approach of trying to determine the correct amount to pay by logical deduction and weighting of various factors to be completely irrelevant. You simply pay what you need to pay to get the people you need. It doesn’t matter where in the country you are or anything, the process is that you negotiate with the prospective employee – like the rest of our civilisation does.

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