Public fat cats and private slimming down - jobs market readjustment

Three articles in The Sunday Times examine the jobs market – or lack of it. Robert Watts starts by reporting which occupations are being hardest hit by the recession so far, and has figures from the ONS to show that the fastest percentage rise in unemployment benefit claimants is amongst high-earning professionals such as architects, quantity surveyors and lawyers, with up to 490% increase between December 07 and December 08 (compared to an average across all occupations reveiwed of 46%). The figures also show that middle aged workers are the hardest hit, with a 30% rise in unemployment for the over-50’s, and tomorrow’s edition of Dispatches on Channel 4 reports on a poll showing that more than 10% of people have encountered age discrimination at work.

A major article by Robert Watts and Richard Woods is inspired by reaction to Robert Peston’s blog last week explaining why bankers would still be getting bonuses this year. The prevailing emotions were incredulity and anger at the state-rescued bankers, and that blog has stayed with the theme through the week – see today’s entry about both the Chancellor and Shadow Chancellor agreeing about the need to control bankers’ pay and bonuses (Politicians put bankers on the naughty step). However the Sunday Times article goes on to look at the changing balance between the public and private sector. In ‘the old days’, statistics showed that pay in the private sector was higher, and textbooks used this as an example of the incentives offered by the sector as a ‘locomotive of innovation and wealth’, and the ‘trickle down effect’ that allowed entrepreneurs to succeed, make profits, expand and add to national GDP and employment opportunities. By contrast now, average public sector pay has over taken the private sector average (£27,144 compared to £23,920), 90% of public sector workers are in final-salary pernsion schemes as opposed to just 12% in the private sector, and it is only in the top 25% of earners that the median salary is higher in the private sector.

The theme of the article, that ‘taxpayers are getting angry at having to pick up the tab for the cosy public sector’, is taken up by an Editorial article, and it offers useful food for thought for students looking at Business Economics, the Distribution of Income, and the employment market. And finally. to show that everyone has an opinion to offer, this video clip from the BBC Daily Politics show has author Frederick Forsyth adding his comments, on why bankers should pay for their part in the recession.

Some questions to consider:

How do the changing figures for average salaries in the private and public sector reflect Marginal Revenue Product of Labour theory?

Should the government allow growing government deficit (with gross public debt at more than 50% of a shrinking GDP) affect public sector pay, job security and pension prospects?