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Earnings gap between public and private sector staff widens, says ONS

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The gap in average earnings between employees in the public and private sector has increased since 2007, according to the Office for National Statistics (ONS).

Comparison of the two sectors is complicated because of differences in the types of job and characteristics of employees. But allowing for these differences as far as possible, according to ONS statistics in April 2010, public sector employees were paid on average 7.8% more than private sector employees.

This was an increase of 2.5 percentage points since 2007, where the pay difference was estimated at 5.3%.

For consistency over time, these estimates assume employees of those banks reclassified to the public sector in 2008 were in the private sector throughout. This analysis is based on characteristics collected in the Annual Survey of Hours and Earnings (ASHE) and the Labour Force Survey.

There are other factors that could influence the pay difference and this analysis does not include other forms of remuneration, for example pension contributions, company cars and health insurance. Also, ASHE does not cover those who are self-employed so it will miss many high paid self-employed and also some lower paid. The timing of the survey in April means that only bonus payments related to April are included, outside of the main bonus season, which is normally January to March.

These factors would account for some but not all of the difference.

Comparing employees who have a degree or an equivalent qualification shows that, on average in 2010, those in the public sector earned about 5.7% less than those in the private sector.

The public sector is made up of a higher proportion of higher skilled jobs - widening over the last decade as lower skilled jobs have been outsourced from the public to the private sector. The public sector consists of a higher proportion of older employees and earnings tend to increase with age and experience.

The public sector workforce contains more people with a degree or an equivalent qualification, 38% in 2010, compared with 23% in the private sector.

The gap between the lowest and highest earners is higher in the private sector with the top 5% (95th percentile) of earners paid around 5.6 times more than the bottom 5% (5th percentile). The gap is 4.6 times in the public sector.