Public Sector Pay Dispute: A Closer Look at Teacher's Union Claims

Strategic Insights -

The National Education Union's decision to vote for strikes in February and March has brought attention to the issue of public sector pay, with the union arguing that teachers have suffered a 23% pay cut in real terms since 2010. However, a closer examination of the data reveals a more complex picture. The union's calculation ignores the value of the deferred salary teachers earn through their generous defined benefit pensions. In fact, when including pensions in total pay, real public sector pay has actually increased.

Key Takeaways:

  • The National Education Union's claim that teachers have suffered a 23% pay cut in real terms since 2010 does not account for the value of defined benefit pensions, which have increased as a proportion of salary.
  • The annual cost to taxpayers of new public sector pensions has risen from 15.5% to 67% of salary since 2010, largely due to lower real interest rates.
  • Including pensions in total pay, the total real public sector pay has increased by 10% since 2010.
  • This applies to all six million public sector workers, not just teachers, in the NHS, civil service, armed forces, police, firefighters, and local government.
  • Real public sector pay has fallen, but real pay in the private sector has risen since 2010.
  • The value of private sector pensions has fallen dramatically in the last 10 years, with defined benefit pensions virtually all closed.
  • Public sector workers could choose a lower pension in exchange for a higher pay rise, closing the unsustainable gulf between public and private sector pensions.

Statistics:

  • From 2010 to 2022, the annual cost to taxpayers of new public sector pensions increased from 15.5% to 67% of salary (Source: Teacher's Pension Scheme accounts)
  • In 2010, the correct total real pay for teachers, including pensions, had increased by 5.5% (Source: Teacher's Pension Scheme accounts)
  • The private sector has seen a decline in defined benefit pensions, with 1,200 schemes closed since 1997, and fewer than 300 left (Source: Pensions and Investments)
  • The average defined benefit pension is now less than 20% of final salary for those retiring in 2023, compared to over 1/3 for those retiring in 2009 (Source: Pensions and Investments)

Sources:

  • Teacher's Pension Scheme accounts
  • Pensions and Investments