Labour Market

Public sector pay rises may have damaging effects on the economy


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Professor Len Shackleton, IEA Editorial and Research Fellow, has written for The Express on why public sector pay increases are not a good idea.

Highlighting misleading figures on private sector wage growth and the dire economic consequences of hiking up public sector pay, Len writes:

“The unions point to figures showing that pay growth in the private sector was five times that in the public sector in the year to May. But this is misleading. Private sector pay is recovering from having been forced down during the pandemic. Public sector pay, by contrast, remained broadly stable.”

“Big pay increases for all in the public sector have the potential to raise inflationary expectations, and ‘bake in’ similar future pay hikes. (…) The danger is that this might bring about a recession and an end to the high level of employment we are currently enjoying.”  

“Without continuing improvements in productivity, real pay increases cannot be sustained for any length of time.”

Read the full article here.



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