NHS pay rises have sparked apocalyptic headlines, but a better public sector makes us all richer, writes Sam Fowles
If one were to list the most socially valuable jobs, one would likely include doctors, nurses, police officers, carers and public transport workers. Yet pay in these professions has lagged well behind inflation for over a decade (excepting train drivers). Last week they all got a raise. This, oddly, prompted apocalyptic headlines. The same politicians and commentators who cosplay as working class when it’s a convenient excuse for stirring up hate against Muslims seem appalled at working class people advocating for and obtaining better pay.
In fact, the public sector raise is good economics, good public policy and benefits all of us.
First, it’s good for the public sector. Almost two fifths (38 per cent) of public sector workers have taken steps to leave their jobs. Last year, 170,000 people left the NHS. If we want people to work in the public sector, then we need to pay enough to make the jobs attractive. Currently doctors and nurses can earn more and enjoy a better quality of life by working abroad. Our public services are in a parlous state. The first step to fixing them must be retaining good workers and recruiting new talent.
Second, it’s good for the broader economy. The “public sector” and NHS collectively account for about a quarter of the UK workforce. Public sector wages have, since 2008, declined by an average of 4.3 per cent in real terms. This means a quarter of the workforce has less money to spend in the private sector. This, in turn, reduces private sector demand. The suppression of wages (and, consequently, demand) is part of the reason that the UK economy has stagnated for so long.
Critics argue the raise will cause inflation, but the correlation between public sector pay rises and inflation is weak or non-existent. Wage-driven inflation occurs when wages outstrip prices, causing a wage-price spiral. The current rises are below the level of inflation (i.e. they’re still real-terms cuts).
Third, it’s cheaper. If you don’t pay people enough to do a job, they’re entitled to stop doing it. The last government sought to make political capital out of picking fights with unions over strikes. Ministers subsequently admitted that it would have been cheaper to settle at an early stage. The economy does better when trains run, the sick are treated and crimes are investigated.
What, then, is behind opposition to the public sector raise? Why doesn’t other government spending provoke the same outcry? State subsidies to the energy sector, for example, amount to around £38bn per year, nearly four times the cost of the public sector raise, and are far more distorting to the market. The real objection is about politics, not economics: the pay rises show that unions work. Criticism of the raise almost invariably degenerates into dark warnings about a “return to the ‘70s” (when hospital waiting lists were lower, everything was more affordable and the crime rate was about half of what it is today).
The hysteria is unwarranted. Unions are democratic organisations which empower their members by giving them a collective voice. Members elect the leadership and vote on policy and big decisions (like going on strike). This makes unions more representative than some of the parties in parliament (Reform UK is a private company over which Nigel Farage exercises near total control). In a political landscape dominated by lobbyists and dodgy money, democratic organisations like the unions are a rare mechanism of genuine grassroots empowerment. Given the most strident objections to the raise come from right-wing think tanks and the populist press, perhaps their real fear is having to share power with the “ordinary people” for whom they claim to speak.
Sam Fowles is a barrister