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Public Service Employment and the Public- Private Wage Differential in British Regions

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  • Andrew Henley
  • Dennis Thomas

Abstract

Successive forms of regional policy in the UK have sought to support the maintenance and creation of public sector employment opportunities in relatively disadvantaged regions. Nationally negotiated public sector pay rates mean that the private-public pay gap is likely to be wider in lower demand regions. This will be reinforced by the relative absence of private sector employment crowding-out in such higher unemployment regions. This paper investigates the association between private and public sector service employment using panel data for British regions, and estimates regional public-private wage differentials using British Household Panel Survey data for 1991 to 1996. Across Britain, private sector employment growth is weakly positively associated with higher public service employment growth, but the association is stronger in Scotland and the North of England. The pattern of regional wage differentials found is consistent with lower crowding-out in higher unemployment regions. This suggests that regional government employment policy can have beneficial effects, providing there is sufficient segregation of private and public sector labour markets to ensure that higher pay in public sector service jobs does not undermine the labour market competitiveness of private sector employers Au Royaume-Uni, les politiques regionales successives ont cherche a promouvoir dans les regions relativement defavorisees le maintien et la creation de l'emploi au sein du secteur public. Les taux de salaire du secteur public sont negocies a l'echelon national, ce qui signifie que l'ecart des salaires public-priverisque de se creuser dans les regions ou la demande s'annonce plus faible. Cela sera renforcepar l'absence relative pour ce qui concerne le prive d'aucun effet d'eviction de telles regions ou le chomage est plus eleve. A partir des donnees regionales aupres d'un panel, cet article etudie le rapport entre l'emploi prive et l'emploi public, et estime l'ecart des salaires public-prive regional employant des donnees provenant d'une enquete aupres des menages britanniques de 1991 a 1996 (British Household Panel Survey). A travers la Grande-Bretagne, la croissance de l'emploi du secteur prive est en correlation faible avec la croissance plus forte de l'emploi du secteur public, mais s'avere en correlation plus etroite en Ecosse et dans le nord de l'Angleterre. La distribution de l'ecart des salaires regional observe correspond a l'absence relative d'aucun effet d'eviction des regions ou le niveau du chomage est plus eleve. Cela laisse supposer qu'une politique en faveur de l'emploi determinee par une administration regionale pourrait avoir des effets positifs, pourvu que les marches du travail public et prive soient assez separes pour que les taux de salaires plus eleves du secteur public n'ebranlent pas la competitivite sur le marche du travail des employeurs du secteur prive Aufeinanderfolgende Formen der Regionalpolitik in Grossbritannien haben versucht, die Erhaltung und Schaffung von Erwerbsstellen im offentlichen Dienst in verhaltnismassig benachteiligten Gebieten zu unterstutzen. Auf Landesebene ausgehandelte Gehaltsstufen des offentlichen Dienstes bedeuten, dass die Kluft zwischen privater und offentlicher Besoldung in Gebieten mit geringer Nachfrage tiefer ist. Dies wird durch das verhaltnismassige Fehlen einer Verdrangung von Arbeitgebern im privaten Sektor in Gebieten mit hoherer Erwerbslosigkeit verstarkt. Gestutzt auf Ausschussdaten fur britische Regionen untersucht dieser Aufsatz die Verbindung zwischen Erwerbstatigkeit im privaten und im offentlichen Sektor und schatzt die regionalen Unterschiede zwischen Lohnen der beiden mit Hilfe der britischen Household Panel Survey Daten fur den Zeitraum 1991-1996. Im gesamten Privatsektor Grossbritanniens kann ein leicht positiver Anstieg im Zusammenhang mit gesteigerter Zunahme der Erwerbstatigkeit im offentlichen Dienst verzeichnet werden, doch die Verbindung ist in Schottland und im Nordosten Englands ausgepragter. Das Muster der festgestellten regionalen Lohnunterschiede entspricht der geringeren Verdrangung in Gebieten hoherer Erwerbslosigkeit. Es liegt nahe, dass die Arbeitsmarktpolitik der Regionalverwaltung auch vorteilhafte Wirkungen haben kann, vorausgesetzt der Abstand des privaten vom offentlichen Stellenmarkt reicht aus, sicher zustellen, dass die hoheren Lohne in Stellen des offentlichen Dienstes die Wettbewerbsfahigkeit des Arbeitsmarkts der Arbeitgeber des privaten Sektors nicht untergraben.

Suggested Citation

  • Andrew Henley & Dennis Thomas, 2001. "Public Service Employment and the Public- Private Wage Differential in British Regions," Regional Studies, Taylor & Francis Journals, vol. 35(3), pages 229-240.
    • Handle: RePEc:taf:regstd:v:35:y:2001:i:3:p:229-240
    DOI: 10.1080/713693809
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    References listed on IDEAS

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    1. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
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    1. Sharunina, A., 2016. "Where Do Public Workers Live Well? Public-Private Wage Gaps in Russia's Regions," Journal of the New Economic Association, New Economic Association, vol. 30(2), pages 105-128.
    2. Richard Disney & Carl Emmerson & Gemma Tetlow, 2009. "What is a Public Sector Pension Worth?," Economic Journal, Royal Economic Society, vol. 119(541), pages 517-535, November.
    3. Axel Heitmueller, 2006. "Public-private sector pay differentials in a devolved Scotland," Journal of Applied Economics, Universidad del CEMA, vol. 9, pages 295-323, November.
    4. Peter Gripaios & Paul Bishop, 2005. "Spatial inequalities in UK GDP per head: The role of private and public services," The Service Industries Journal, Taylor & Francis Journals, vol. 25(8), pages 945-958, December.
    5. Carlo Dell'Aringa & Claudio Lucifora & Federica Origo, 2007. "Public Sector Pay And Regional Competitiveness. A First Look At Regional Public–Private Wage Differentials In Italy," Manchester School, University of Manchester, vol. 75(4), pages 445-478, July.
    6. Mercedes Rodríguez & José A. Camacho, 2008. "The geography of public services employment in Europe: concentration or dispersion?," The Service Industries Journal, Taylor & Francis Journals, vol. 28(3), pages 325-335, April.
    7. Axel Heitmueller & Kostas G. Mavromaras, 2007. "On The Post‐Unification Development Of Public And Private Pay In Germany," Manchester School, University of Manchester, vol. 75(4), pages 422-444, July.
    8. Zhuravleva, Tatiana (Журавлева, Татьяна), 2015. "Analysis of the Factors of Wages Differentiation in the Public and Private Sectors of the Russian Economy [Анализ Факторов Дифференциации Заработной Платы В Государственном И Частном Секторах Эконо," Published Papers mn10, Russian Presidential Academy of National Economy and Public Administration.
    9. Disney, Richard F & Gosling, Amanda, 2003. "A New Method for Estimating Public Sector Pay Premia: Evidence from Britain in the 1990's," CEPR Discussion Papers 3787, C.E.P.R. Discussion Papers.
    10. Ahmed Nawaz Hakro & Yaseen Ghulam & Shabbar Jaffry & Vyoma Shah, 2021. "Employment Choices and Wage Differentials: Evidence on Labor Force Data Sets from Pakistan," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 64(1), pages 199-216, March.
    11. Robert Elliott & David Bell & Anthony Scott & Ada Ma & Elizabeth Roberts, 2005. "Devolved government and public sector pay reform: Considerations of equity and efficiency," Regional Studies, Taylor & Francis Journals, vol. 39(4), pages 519-539.

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