The Pattern and Evolution of Geographical Wage Differentials in the Public and Private Sectors in Great Britain

36 Pages Posted: 9 Jul 2007

See all articles by David N.F. Bell

David N.F. Bell

University of Stirling - Department of Economics; IZA Institute of Labor Economics

Robert F. Elliott

University of Aberdeen - Business School

Ada Ma

University of Aberdeen

Anthony Scott

University of Melbourne - Melbourne Institute of Applied Economic and Social Research

Elizabeth Roberts

University of Stirling - Department of Economics

Abstract

Government policy on the nature of wage bargaining in the public sector can have important implications for the provision of public services. Using the New Earnings Survey, the Labour Force Survey and the British Household Panel Survey, we examine the size and evolution of public-private sector wage differentials across geographical areas within the UK and over time. Public sector bargaining structures have led to historically high wage premia, although these premia are declining over time. In high-cost low-amenity areas, such as the south-east of England, the public sector underpays relative to the private sector, therefore creating problems in recruitment to and provision of public services. Public sector labour markets are around 40 per cent as responsive to area differences in amenities and costs as are private sector labour markets. Differences in the degree of spatial variation between sectors are likely to remain, leading to persistent problems for the delivery of public services in some parts of the UK. Reform of public sector pay structures is likely to be costly, and so other non-pay policies need to be considered to increase the attractiveness of public sector jobs.

Suggested Citation

Bell, David N.F. and Elliott, Robert F. and Ma, Ada and Scott, Anthony and Roberts, Elizabeth, The Pattern and Evolution of Geographical Wage Differentials in the Public and Private Sectors in Great Britain. Manchester School, Vol. 75, No. 4, pp. 386-421, July 2007. Available at SSRN: https://ssrn.com/abstract=998653 or http://dx.doi.org/10.1111/j.1467-9957.2007.01023.x

David N.F. Bell (Contact Author)

University of Stirling - Department of Economics ( email )

Stirling, Scotland FK9 4LA
United Kingdom
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IZA Institute of Labor Economics

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Robert F. Elliott

University of Aberdeen - Business School ( email )

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Ada Ma

University of Aberdeen ( email )

Dunbar Street
Aberdeen, Scotland AB24 3QY
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Anthony Scott

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

Elizabeth Roberts

University of Stirling - Department of Economics ( email )

Stirling FK9 4LA, Scotland FK9 4LA
United Kingdom

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