Public sector employment up

Although not exactly a new story, the article Public Sector Employment by Stephen Hicks and Craig Lindsay in this month's Labour Market Trends does tell us a lot more about what's been happening to UK public sector jobs. It expands upon a 11 March website note that was the subject of some controversy. (Though I do wonder why growth in public sector jobs would be a surprise to anyone, when the UK government has been trumpeting the extra billions going to health and education for years). The two key findings:

• There has been steady growth in public sector employment since 1998 and in the first quarter of 2004 it is up 583,000 in total. In the year to March 2004 public sector employment increased by 146,000.
• Over 80 per cent of the increase since 1998 has been in the health and education sectors, although most categories have shown an increase.

However, it should be noted that UK public sector employment levels are still below those prevailing under the Conservatives in the early 1990's.

Does public sector job growth matter ? Well, in a period of low unemployment and rising skill shortages, it might. A recent study by Céline Choulet of 11 OECD countries over the period 1960-1995, Public employment and labour market performance: centralization wage setting effects, found that "public jobs crowd out private jobs through an increase in wage pressure". She also found this crowding-out effect was "statistically significant only in countries in which the wage setting is decentralized", such as Britain.

Comments

[Jack Gabb]

Whilst the increase in public sector may not be deemed that important, it should be noted that it is set to rise by another 250,000 by 2008.

Given the levels of public sector pay outside the Greater South East region, such increases in public sector employment should be analysed for potential crowding out/crowding in effects in local labour markets. This is an area that does not appear to have been over worked in the UK.

Jack Gabb
Workforce, Pay and Pensions
HM Treasury