Realist, not conformist analysis of the latest financial, business and political news

Finally, Something Sensible – Geography Based Public Sector Pay

It’s rare to find a government proposing something that should have our full blooded support. It’s even rarer from the current lot of Chinos – conservatives in name only. Or as we might also describe such clothing, the societal solution for where do we keep the dangly hairy bits? But that is what appears to be happening. They’re seriously floating a most sensible idea. That public sector pay no longer be nationally set. Living costs vary wildly over Britain. Therefore the standard of living provided by any particular income does. There’s not really any particular reason why a nurse in Rochdale should have a much higher standard of living than one in Rochester. And good reason why he shouldn’t. National pay scales kill in fact, something we do already know.

Future public sector wage increases must be based on people’s performance and where they live, ministers have been told in advance of the budget.

It’s that where they live bit which is so important:

Philip Hammond, the Chancellor, wants greater “flexibility” over public sector pay and is looking to take a more “targeted” approach after the abolition of the 1 per cent cap earlier this year.

Still making a mistake in thinking that this should be centrally directed but it is a step in that correct direction all the same:

Liz Truss, Chief Secretary to the Treasury, warned Cabinet last week that pay rises will be dished out according to the need to retain staff and incentivise good performance,The Telegraph reported.

Well, yes, what else should you be basing pay on other than finding and motivating the people you desire to have?

The thing is, we really do know that having national pay scales really does kill people:

Centralisation kills is the message of a new paper (should be here by the time you read this) from the Centre for Economic Performance. Centralisation, in this sense, meaning the setting of standard national pay rates.

What the authors did was look at the quality and productivity of nursing across the country, this being measured by the percentage of those admitted to hospital after a heart attack (AMI) who died in the subsequent 30 days. As we’re all told so often of the connection between (relative) poverty and bad health we would expect the rates to be higher in poor areas. Quite the contrary: the richer the area surrounding the hospital the worse the survival rate. The reason for this is that nurses’ wages are set centrally, to be the same (with very little geographic variation) right across the country. However, wages in general are not the same across the country.

Thus the relative wages for a nurse are lower in high cost areas. Thus there are fewer nurses and worse health care treatment in high cost areas. As has been pointed out:

We do know that national pay for nurses kills people. National pay, by definition, cannot reflect local employment markets nor living standards. Having the one rate thus produces a shortage of nurses in high cost of living areas and that really does kill people. Our answer should thus be to get rid of the entire idea. Devolve pay down to the actual employer.

The hospital, the fire brigade, the local police force, should pay what it needs to in each area in order to attract the people and skills it requires. Just like every private business in the country does. This would almost certainly mean substantial pay rises in London and falls in less expensive living cost areas.

Why, we’ve even pointed it out here just recently:

So, obviously enough, to stop killing people we should stop having national pay settlements. And it is worth noting that those blackspots, the notspots, for care are in the richer areas of the country….

So there you have it, the power of this newspaper. We demand on October 11 and Government does by October 23 the same year. Under two weeks – who else has that sort of power then? Of course, it could be that it’s just a blindingly obvious thing to do but then that’s rare for a government too, isn’t it

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Quentin Vole
Quentin Vole
2 years ago

Lots of large, national businesses have national pay scales (usually with a London and possibly SE England weighting).

2 years ago
Reply to  Quentin Vole

Not really national pay scales then are they? The weighting is the difference for the more costly places to live.

Quentin Vole
Quentin Vole
2 years ago
Reply to  MrYan

Gummint does the same. But this doesn’t reflect the nuances – Manchester is a more expensive place to live than Middlesbrough, but they end up on the same pay scale.

2 years ago

We’ve currently got a public sector strike in Glasgow over pay rates. Ok, the worker has the right to bargain with their absense from work as one of their chips. But what are they striking over? Equal pay for equally valued jobs. Note, not equal jobs, but jobs of equal value. Since the 1970s it’s been illegal to pay different people different rates for the same job. Emptying bins gets paid the same as emptying bins regardless of the content of your pants, your head, or your skin cells. But that is objectively the same job. How do you determine… Read more »

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