Income Inequalities in Britain’s Public Service Pay

Income Inequalities in Britain’s Public Service Pay

Now the gap between the lowest and highest paid in the UK is one of the highest in the OECD, Iain Overton looks at the role of public sector pay in widening the disparities

It is not news to say that times look bleak for many in the UK. Households face a “miserable” 2023, according to a survey of leading economists. The country is forecast to suffer a worse recession than most other advanced economies, while living standards look set to fall by the largest amount since records began in 1956. 

It’s been reported that, by 2024, the average Slovenian household will be better off than its British counterpart.

In step with this comes a rise in income inequality. The Gini coefficient, which offers a summary measure of income inequality across the distribution, shows that the distance between lowest and the highest-paid people in the UK is now so bad that of all OECD countries, only Mexico, the US and Costa Rica have a bigger gap between the richest and the poorest. 

To put this in real terms: the number of UK billionaires has increased by a fifth since the onset of the COVID-19 pandemic. Meanwhile, the charity Save the Children has voiced concerns that the UK’s poorest families are in acute need and have urged ministers for immediate extra financial support. 800,000 pupils from poor families, for instance, are today being denied free school meals.

This division between the rich and the poor in Britain is not new. But it has been exacerbated by the cost of living crisis and further entrenched by over a decade of Conservative rule.

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This is not a political point-scoring claim. Just look at the top earners in our own Government classes. 

In 2012 in the Cabinet Office’s own senior officials ‘high earners’ salaries, there were 214 Mandarins earning more than £150,000 (an average of £176,519). A decade later, 569 central civil servants now earn in excess of £150,000 – a 166% increase (averaging £182,000). 

Within the Civil Service itself, Britain’s wage gap between the highest earners and lowest has become more pronounced. This is reflected across government, as people at the top are successively paid more in real cash terms than those at the bottom.  Pay rises have been higher for the best paid, whereas the lowest paid have seen increases that many claim cannot cover the rising cost of living.

A decade ago, a junior soldier was on about £17,515 a year. A Colonel, on the other hand, was on £82,124. Today, the soldier’s salary has increased by almost £4,000, but the Colonel’s salary has gone up some £13,000.

The same has happened in the police. A junior constable’s starting salary a decade ago was £22,318, compared to a Chief Inspector beginning their role on £49,693. Since then, the constable’s wage has increased by £5,800 while the Inspector’s has gone up by £10,514.

Similarly, a lowly prison officer has seen their salary increase by £3,000 since 2012, compared to a £7,800 boost enjoyed by first-rank Governors. A trainee firefighter’s salary has increased £2,600 in a decade, whereas a Fire Service Area Manager has increased by £6,000. And in the NHS a nurse may have seen their salary increase by almost £6,000, but a junior consultants’ has increased by £13,000.

This inequality in pay rises is the result of percentage-calculated inflationary beating measures. When guideline percentile pay-rises are added, it follows that the more you earn, the bigger your pay rise.

But this fails to recognise that the rising cost of the basics of living – electricity, petrol, bread, milk, butter, bacon, pasta – remain blind to whether you are a nurse or a consultant, a soldier or a Colonel.

Clearly some thought has gone into this. Soldiers’ pay went up by 22% compared to Colonels at 16%; police constables’ up 26% to Chief Inspectors’ 21%; nurses’ 42% to Consultants 17%. But when you are starting from a higher earning point, the senior roles always get more in real terms to take home than their underlings, even after tax.

The following inequality gap appears to be at the root of the current raft of strikes.

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The answer could be to increase the pay of the lowest more, or the same, as the highest, in real terms, but this never happens. That it does not will only lead to more headlines such as “the cost of living crisis is forcing nurses to choose between fuel and food.” 

The idea that the lowest paid should be given equal or more money than the highest paid to combat inflation is not that revolutionary. It was rooted in one conclusion by the Office of National Statistics, no less. It found cash benefits had been the most effective at reducing income inequality in 2021. 

In other words, pay the poorest more.

Britain’s widening gap between the haves and have-nots has been a long time coming. The OECD published a comment piece 10 years ago that declared that in the 37 democracies with market-based economies that constitute its membership: “the ratio of top income decile to bottom income decile reached its highest level in 30 years.”

Its solution was a report that looked at reforms that led to reducing inequality. It found the gap between the richest and poorest was narrowed “by delivering stronger income gains for households at the bottom of the distribution compared with the average household”.

But why does this matter? To answer this question, the OECD then asked, above and beyond social cohesion, if growing inequality undermines overall national economic growth? Does it harm all of us?

It does.