Outlook for public sector workers may not be so bleak

As opposed to the recession of the early 1990s this time around (2007-2009) the UK private sector lost far fewer jobs, 822,000 versus 1.3m, according to research from private consulting firm Deloitte. The reasons for that, according to some experts, were increased flexibility and greater government hiring.

The first is certainly good news, and reflects lower hours worked and lower real wages, while the second may still turn out to be a mixed blessing to the extent that it diverts resources from the private sector.  On a positive note, however, the outlook for employment in the next few years is not necessarily bad, although there are downside risks.

At the sector level, what have been the tendencies and what might they be in the future?

Between 2007 and 2010 total public sector employment actually increased to 6.04m, from 5.795m, according to the Office of National Statistics (ONS). This growth was led by increases in employment at the National Health Service (by 110,000) and in Education (48,000), but the largest gain has been in the ‘other public sector’ category (161,000).  The largest losses, on the other hand, have been for persons working in Public Administration (65,000).

Also of interest, local government public sector workers diminished by 54,000 over that same time frame, to 2.907m.

So, just what is the outlook for public sector workers? That depends on a host of factors but, perhaps critically, some of the worst scenarios can apparently be avoided and to a certain degree they may already have been. Thus, in a recent report the independent Office for Budget Responsibility (OBR) indicated that public job losses will now be less than previously estimated (330,000 over 4 years versus the 490,000 previously thought). The reason is that the government now seems to be putting more emphasis on benefit cuts and less on slashing departmental spending.

Not to be lost sight of either, experts at the National Institute of Economic and Social Research (NIESR) have in the past recommended that the government opt for an extension of the age of retirement by three years, which would obviate the need for those cuts. 

If we also take into account the private sector then, according to ONS data, between 2007 and 2010 the largest increases in jobs were seen in Agriculture (14.5%), Electricity (19%), Real Estate - somewhat surprisingly - (10%) and Health services (8.9%). The largest losses, meantime, were seen in Manufacturing (-15%), Mining (-14%) and in Construction (-9.6%). Intriguingly, sterling´s weakness has not yet led to an improvement in hiring in manufacturing, apparently due to gains in productivity, despite the fact that there may be some positive structural forces at work here now.

Lastly, the truth is that ONS data show unemployment (on the ILO basis) to have been relatively stable since mid-2009 in absolute terms. Having said that, if we take the OBR's forecasts for gross domestic product (GDP) growth in the United Kingdom as an example (2011: 2.1%; 2012: 2.6%) then one would expect employment to improve only moderately, at best, in the next couple of years, and the sector breakdown may be hinting at the need to promote ‘value added’ industries.