Public-sector employees want their pay to keep pace with rising prices but that would require offsetting spending cuts, higher taxes or more borrowing
network came to an abrupt halt on June 21st as striking rail workers protested against a below-inflation pay offer, among other things. With further industrial action planned for June 23rd and 25th, the disruption threatens to endure. It also threatens to spread. On June 19th the teachers’ union warned of industrial action. Doctors, nurses and local-government employees could go on strike, too. Together theThe underlying problem is that high inflation is eating into people’s income.
That has made conflict over wages all but inevitable. Public-sector employees want their pay to keep pace with rising prices: one teachers’ union is demanding a 12% pay award, for example, against a government suggestion of 3%. But each one-percentage-point increase in the wage bill would cost the government around £2.4bn , or 0.1% ofReconciling these tensions will not be easy.
Arguments line up on the other side, too. Trade unions are not wrong to say that many staff will struggle to make ends meet. Next April the state pension will rise by at least September’s rate of inflation—why should public-sector employees not be afforded the same protection as pensioners? It is ultimately for the Bank of England to keep inflation under control, and for the government to set the level and quality of public services it desires.
One increasingly salient consideration is the risk of public servants fleeing to the private sector—or not joining at all. Over the three months to April pay in the private sector, excluding bonuses, grew at an annual rate of 4.8%, compared with just 1.8% in the public sector. According to Ben Zaranko of the Institute for Fiscal Studies, a think-tank, average pay in the public sector is still higher than in the private sector but the gap between the two has narrowed significantly .
Over the coming months the government will consider recommendations from eight pay-review bodies, and then haggle with an array of unions over the amounts. The upshot will be variety in the generosity of pay deals, both within and across occupations. Within occupations, workers at different levels of seniority are likely to get different pay bumps.