New report says there is no evidence to show public sector crowds out private investment


New research commissioned by UNISON has found the government’s arguments for regional pay in the public sector to be ‘deeply flawed’ and based on a false premise.

The research, carried out by Incomes Data Services (IDS) on behalf of the union, puts paid to the government’s central argument for local and regional pay determination, the suggestion that national public sector pay scales ‘crowd out’ employment and investment by the private sector.

UNISON assistant general secretary Karen Jennings will be writing to MPs with a copy of the research setting out the arguments and urging them to show their support for national pay bargaining in the public sector.

On the report, Karen Jennings said: “This comprehensive report confirms what UNISON has said all along; the government’s ‘crowding out’ theory is deeply flawed and has no basis in fact. Now that the government’s premise on regional and local pay is shown to be false, we would urge them to stop this blatant attempt to drive down wages, disguised as encouraging growth.

“This research demonstrates that public sector employment doesn’t crowd out private sector investment, rather it complements it and supports the local population.

“It’s time for the government to stop attacking our vital public services, and instead concentrate on programmes of investment and job creation, not just in London and the South East, that will put money in people’s pockets and generate real growth in our struggling economy.”

The report, Crowding out: fact or fiction, makes five key points:

1.    Public and private sector employers are not competing for the same workers

2.    Crowding out theory cannot work when unemployment is high

3.    Private sector pay does not vary hugely across regions

4.    Private sector job creation and job losses appear to be completely unaffected by public sector pay

5.    Public sector employment isn’t crowding out; it supports local population.

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