Tag: public-sector pay

Most people, when asked, would like to earn more and many people are prepared to make sacrifices to do so. They may devote considerable time to obtaining qualifications; work much harder in order to gain promotion; work longer hours. What is more, when people do earn more, they take on extra commitments: a bigger house with a bigger mortgage; sending their kids to a private school; getting used to a more luxurious lifestyle. In fact, many people have to spend more on things such as home help, convenience foods and all sorts of labour-saving devices in order to cope with their longer hours.

Some people get so fed up with this pressurised lifestyle that they say ‘enough is enough; let me off this merry-go-round’. They may be happy to take a cut in income to live a simpler life and have more leisure time. Others, however, find that the merry-go-round just keeps going faster and faster and that they cannot get off; except, perhaps, if they make themselves ill, or worse still, die!

Now, if you are struggling as a student to make ends meet and find your debts are inexorably mounting, you may have little sympathy for people earning six-figure salaries! But are you in danger of trying to achieve this lifestyle for yourself? Do you see the main goal of your degree as getting you a better-paid job? What would count as ‘rational behaviour’ here and what would an economist advise you to do?

Then there is the question of whether the high paid are worth their high salaries. Are these salaries a reflection of the value of their output and the sacrifices they make? Or do they reflect economic power, custom and practice or asymmetry of information? And what do we mean by ‘worth’?

The following articles look at some of the highest paid people in the public sector. Some 38,000 public-sector employees earn more than £100,000. In the private sector the figures are much higher: some 545,000 people.

The perils of earning a £100,000 salary BBC News Magazine, Jon Kelly (22/9/10)
Ranking the pay packets of the public sector’s top dogs BBC Panorama programme, Vivian White (19/9/10)
Public Sector pay: The numbers BBC News (20/9/10)
Over 9,000 in public sector earn more than David Cameron, survey claims Guardian, Nicholas Watt (19/9/10)
On the inequality myth The Economist blogs (20/9/10)

Portal to Annual survey of hours and earnings (ASHE) Office for national Statistics
Family Spending – A report on the 2008 Living Costs and Food Survey (see Chapter 3) Office for national Statistics
Income inequality Office for national Statistics (10/6/10)
The effects of taxes and benefits on household income, 2008/09 Statistical Bulletin (ONS) (10/6/10)
Data: The effects of taxes and benefits on household income, 2008/09 Office for national Statistics


  1. Use Gini coefficients to examine what has happened to income distribution in the UK in recent years.
  2. Are high-paid earners ‘worth’ what they are paid? How would set about establishing what they are worth?
  3. Is it rational to seek a higher paid job if it involves longer hours and more stress? Why may it be difficult to make a ‘rational’ decision?
  4. Should the Prime Minister be the highest paid public-sector employee? Explain your answer.
  5. What factors will you take into account when deciding what jobs to apply for?
  6. To what extent can imperfect information explain people’s choices about work-life balance?
  7. To what extent can marginal productivity explain the huge salaries and bonuses paid to top executives in both the public and the private sectors?