Overview
With the large spike in inflation that has occurred since late 2021 and the associated cost-of-living crisis, there has understandably been intense interest in how workers’ earnings have kept up (or not) with rising prices. This short report examines one aspect of earnings growth: how public sector earnings have performed in recent years, particularly focusing on the period since the 2019 election.
Key findings
1. Average pay in the public and private sectors has performed very differently since the election in 2019. Real public sector earnings initially grew substantially during the pandemic (whereas private sector earnings fell as many were furloughed). But the ensuing rise in inflation hit public sector pay much harder due to government pay restraint. Overall, between December 2019 and November 2023, inflation-adjusted average private sector pay grew by 2.3%, whereas public sector pay fell by 0.3%.
2. These recent trends come on top of poor earnings performance in both sectors since 2007. Real public sector pay at the end of 2023 was still 1% lower than its level at the beginning of 2007. Real private sector pay increased by 4% from 2007 to 2023.
3. Within the public sector, some high-profile professions (nurses, and particularly teachers and hospital doctors) have seen considerably worse pay growth than the average public sector worker. Indeed, teachers saw large reductions in average real pay from 2010 to 2019 (falling 13%) but have seen stronger pay growth since then (with pay 5% higher in September 2023 than in April 2019 after accounting for the pay deals agreed last summer). Overall, this still leaves average teachers’ pay in September 2023 9% lower than in 2010.
4. Looking at trends in the English NHS, nurses saw a significant reduction in real pay over the 2010s (falling 7% between 2010 and 2019) and only a modest recovery since, with average nurse pay growing by a little less than 1% over the same 2019–23 period. Doctors also saw pay cuts between 2010 and 2019 (of around 10%) but, unlike teachers and nurses, have also seen their pay fall further in the period since 2019, making them the hardest-hit group of the three.
5. Doctors and teachers, as higher-paid public sector workers, have felt the consequences of compression of public sector pay, with pay deals consistently benefiting lower-paid workers more than higher-paid workers both within and across professions. Compared with 2007, the real earnings of a public sector worker at the 75th percentile (i.e. earning more than 75% of public sector workers) had fallen by 8% by 2023, whereas for a lower-paid worker at the 25th percentile, real earnings had risen by 16%.