Um, any actual details of these proposals? Hard to know if they’re reasonable if we don’t know what they are.

Under these plans teachers, nurses and other public sector workers who live in less prosperous parts of the UK would be paid less than colleagues who work in wealthier areas.

I wonder what the response would be if the question were phrased “Under these plans teachers, nurses and other public sector workers who live in more expensive areas will be paid more than colleagues who live in cheaper areas”

There’s a slight whiff of the Yes Minister poll about this.

I think the headline should read ‘public overwhelmingly couldn’t give a monkeys about regional pay’. I did my dissertation on the potential to bring back Whitley committees with adaptive minimum wages and…oh, sorry, i’ve just bored myself. It was 20 years ago. Anywho – a kneejerk block to this policy is a bit harsh as it also helps councils retain staff too so…oh, no, it’s happened again…zzzzzz

Thought this looked fishy and, as suspected, it’s a mackerel.

The question actually asked was not “do you opppose regional pay differences” but

The government is proposing to freeze the pay of public sector workers outside of London and the South East. Do you think this is fair or unfair?

And from the OP

“Under these plans teachers, nurses and other public sector workers who live in less prosperous parts of the UK would be paid less than colleagues who work in wealthier areas.”

rather than

“Under these plans teachers, nurses and other public sector workers who live in more expensive parts of the UK would be paid more than colleagues who work in less expensive areas.”

See how different that sounds?

Sunny will lose that white rabbit one day………

Is this an argument against the London Weighting? It’s only a regional pay structure under a different name. Note that a number of national companies have a local weighting structure to allow for the varying costs.

Nevertheless, I was surprised to read that the details of these, as yet unpublished, proposals were so carefully laid out. Or am I being mislead by someone who is setting up a paper tiger to fight?

Tim J

Alas the government and the government-supporting press has tended to talk about paying less in poorer areas. Bad PR on their part – but probably more true given that they have tended to justify this by stressing that teachers earn higher than private sector average wages in the north of england and have been keen not to suggest this will swell public spending and thus expand the public deficit.

Strange thing here – this is actually a very ideological policy issue.

Either one thinks government has no or little role in directing markets – and so should pay according top market rates across the country.

Or one thinks government has a sizeable role in challenging consequences of markets – and so should pay a consistent rate to lessen inequality from region to region.

Of course neither is right or wrong. It is a rare “we believe in…” policy – with a fairly clear left (Labour)/ right (Tory/Lib Dem) split.

For what it’s worth – I back equal pay as I tend to think we need to rebalance our economy geographically, and sucking money out of consumer pockets in the North is unlikely to support that aim.

m4e @ 7:

“I back equal pay as I tend to think we need to rebalance our economy geographically, and sucking money out of consumer pockets in the North is unlikely to support that aim.”

If you want to rebalance the UK economy geographically, national pay scales that pay public sector staff above the market rate in economically depressed regions will only make the situation worse because those pay rates mean that the public sector crowds out the private sector by incentivising employees to seek public sector employment. Firms cannot then recruit staff of the appropriate calibre and either relocate to another region or close. Which results in calls for more public sector ‘investment’ in the depressed regions, until the public sector share of regional GDP approaches Soviet levels.

8

There are few public sector jobs available in all areas, last month, a low-skilled job in the NHS in my area, attracted over 300 applicants, many with a degree and above. Lowering the wages of existing staff (all grades) will either lead to less money available in the local economy (as M4E notes) or/and staff deciding to do agency work (which is better paid). But then this leads to whole wards/units being staffed by different people on a day to day basis. This has been identified as the reason why hospitals in London and the South East (in particular cardiology) have poorer outcomes than hospitals outside of those areas.

This has been identified as the reason why hospitals in London and the South East (in particular cardiology) have poorer outcomes than hospitals outside of those areas.

But we obviously can’t pay more in these areas, because that would be a regional pay difference…

those pay rates mean that the public sector crowds out the private sector by incentivising employees to seek public sector employment.

What private sector employment?

10

Not quite what I am saying, my argument is about decreasing pay in provincial areas (believe me that’s what will happen) If it was only about London Weighting Allowance I, for one, would have no problem.

steveb @ 9:

“There are few public sector jobs available in all areas, last month…”

But the talented and able have already either moved away or they are working in the public sector locally. And local enterprises cannot tempt them into the private sector, because they can’t compete with public sector pay rates.

“Lowering the wages of existing staff (all grades) will either lead to less money available in the local economy (as M4E notes)…”

Yes, there’ll be adjustment costs. But you cannot sustain a local economy on the consumption of relatively overpaid public sector staff.

“…or/and staff deciding to do agency work (which is better paid).”

Agency work is better paid, but relatively few public sector jobs are suitable for cover by agency staff and the higher (hourly) pay does not compensate for the loss of the generous T & C’s that public sector workers have. Where housing and the cost of living are expensive, some public sector staff may well have little choice but to move to agency work. In which case perhaps we need to pay (say) nurses in Surrey more than nurses in Hull or Barnsley. Your example, as Tim J indicates, undercuts your argument as it demonstrates the need for regional pay rates.

Surprisingly though, the same public doesn’t mind regional rent differences. A public with principles.

BenM @ 11:

“What private sector employment?”

The private sector employment that would be there if the relatively overpaid public sector had not crowded out much of the private sector by employing the talented who have not moved away.

TONE and the rest of the lice @ 8

I understand you bastards get enjoyment in driving the wages of working class people into the dirt, even Vince Cables sees the sexual thrill you cunts get out of hurting plebs. However, you could at least have the common decency to write stuff that is even half way believable.

because those pay rates mean that the public sector crowds out the private sector by incentivising employees to seek public sector employment.

How is that even half way possible? The public sector ‘crowd out’ the private sector? How? How could that possibly happen? So your own ‘logic’ works like this:

A company attempts to recruit someone in the North, but the public sector wages are too high, so they relocate to the South of England where wages are even higher?

You cunts are trying to destroy public services, we get and (some people) respect that.
You hate public servants and we get that too.
You really are attempting to destroy the lives of those who rely on public services, and we get that too.

However, you are actually willing to throw up any old toss into the mix in a half hearted attempt to justify your position.

So here is a little teaser for you. Two young men both out of school, with little immediate prospect for work. One living in Fife, the other living in the more affluent part of the South East. The young guy from Kirkcaldy applies to join the Black Watch and Tory boy here decides his life is worth, along the lines of the free market, about three sixty and hour? You will try and sell that to piss soaked, undead blue rinsers at the Tory conference? And people wonder why I fucking well despise the Tory scum.

How is that even half way possible? The public sector ‘crowd out’ the private sector? How? How could that possibly happen?

I’ve had a post vanish into the ether, so forgive me if this is a repeat. Crowding out isn’t a new theory – here’s a Willem Buiter paper on it from the mid-70s.

http://www.princeton.edu/~erp/ERParchives/archivepdfs/M191.pdf

Nor is it a settled one. Here’s a recent LSE paper on employment crowding out in Wales:

http://www.spatialeconomics.ac.uk/textonly/serc/publications/download/sercdp0111.pdf

Summary of that is that in the short term public sector employment is broadly flat on private sector employment, but that within that is a boost to services and a negative impact on manufacturing. In the longer term (although the data are less good) the cuts to manufacturing jobs outweigh the new public sector jobs in their impact on private sector service jobs to the extent that an observable crowding out effect occurs. In other words, “over longer time periods public sector employment crowds out private sector employment”.

On the other hand, UNISON have also released a paper that denies the entire basis of crowding out.
http://www.unison.org.uk/file/IDS%20research%20report%20for%20UNISON%20on%20crowding%20out%20July%202012%20(2).pdf

So, as always with these things, there’s something there for everybody to get furious about and call their opponents liars and scum.

@16 – Jim. Has the nurse taken the afternoon off, you disgusting inebriate?

Tim J @ 17

Come on Tim, that is just Right wing piffle written because it would be nice if it were true, you know it and I know it and you know that I know it.

The real World is far more complicated than that. Nobody is closing down in the North or certain parts of Scotland because the public sector wages mean the private sector cannot compete against. Of the six GPs in my local surgery, precisely none are local boys turned good, they are all from (or live in) Edinburgh and it’s posher (higher paid) suburbs. Nothing wrong with that by the way, but they would rather live in Edinburgh than the backwater of West Lothian. Cutting the wages of these guys would make it harder for us to recruit good quality doctors, but make Edinburgh a bit better off. Nor are these guys going to give up public sector medicine to become software engineers either. Same with the local hospital in Livingston, which is being run down to prop up the PFI job in Edinburgh too. Cutting wages would speed up the process as people would move away from the low paid, to the higher paid jobs, leaving us with those further down the ability table.

We both know this death by a thousand cuts and why bother to pretend otherwise? You will not be happy until you are pissing on the grave of the NHS and those who rely on it.

#8

Are you suggesting that those who earn their London-esque wages for being doctors and nurses in Hull presently go to London to spend their money?

Because I suspect that is not true and in fact they tend to spend their wages in Hull, at least partly – and thus spur private sector growth and jobs in Hull (since I assume Hull’s pubs, restaurants, shops and cinemas are not all owned by the state).

And in fact, I would imagine that as the only consistently large wealth transfer from the South to the North – I would also suggest that paying relatively high wages to public sector staff in the north, and relatively low wages to public sector staff in the south, perhaps help to ensure that all such qualified people don’t move south and instead stay in the north and enhance the skills base there by not being part of an effective brain drain.

Of course I could be wrong – but that seems unlikely in this instance as we are talking about some pretty basic economic principles that have been observed over hundreds of years (indeed even since before the early days of industrialisation when people took their skills from low paid and under-worked countrysides and to better paid and higher employed cities, leaving this country a rather urban place compared to the rest of the world.

Again – you might have an ideological stance that we should encourage that ongoing migration from poor places (the north) to rich places (the south) – but that’s back to the ideological view that we should try to overcome some of the consequences of markets, or as you might perfer, we should facilitate markets free from such intervention.

–

ps – I am simplifying with the north south divide as this is a five minute blog post. The thread could easilly have had people moving from Bradford to Manchester, with little by way of north to south drift implied…

ps

crowding out can happen – but in this instance it is a lot of rubbish.

Public sector spending draws in skills and resources that are thus then not available to the private sector. Similarly we see this with government borrowing, which if investors are enticed to buy bonds, they are unlikely to invest in growing companies.

But as I say – it is a lot of hogwash in the case of public sector employees in the north earning what their counterparts earn in the south.

The reason for this is simple. Unless we plan on sacking lots of nurses and police and Jobcentre Plus types – their skills are still needed and utilised in the public sector under regional pay – they just get less in wages to spend in the private economy.

As such the private sector is not set to gain anything but less spending from public sector workers from this proposal.

Of course there is an alternative interpretation. By paying less, talented staff might be inclined to go work in the private sector instead of in the public sector. So we will then have less good teachers, police, doctors, admin staff and nurses in Hull because the talent has moved to low but slightly higher wages in private sector jobs.

So the call for regional pay – if the displacement of private sector employment is to be believed – does rather rely on a desire to make the public sector in low pay areas rather less good, rather less capable, and presumably therefore, rather less efficient.

But hey, maybe tories don’t believe you need to allow employers to pay high wages to attract and retain top staff in a given location.

perhaps that’s why they’ve capped banker bonuses and executiove pay in the City and hapilly raised taxes on the rich and on non-domiciles?

13

My argument was based on decreasing current pay not adding a London Weighting Allowance on to existing pay.
Agency work is better paid whether it be Barnsley or Central London, however, while agency working appears to be a favourable option in London and the SE, it isn’t in the provinces, this could be down to a different local culture.

And as I have already noted, public sector jobs are very hard to come by here so the conditions are already in place for the private sector to find suitable qualified and non-qualified staff.

Come on Tim, that is just Right wing piffle written because it would be nice if it were true, you know it and I know it and you know that I know it.

Sure, you know more about economics than Willem Buiter and Professor Overman. Their views can automatically be refuted with a wave of the hand as obviously wrong.

You will not be happy until you are pissing on the grave of the NHS and those who rely on it.

This is what’s technically known as poisoning the wells.

Anyway, I’m not saying that there is public sector crowding out in the North/Wales/Scotland. I have no idea whether there is or there isn’t. I’m not an economist. I do know, however, that there is a theory of “crowding out” that goes back to Adam Smith, and that poor old TONE up there didn’t invent it out of whole cloth because he’s a Tory who likes eating babies.

Jim @ 16:

“A company attempts to recruit someone in the North, but the public sector wages are too high, so they relocate to the South of England where wages are even higher?”

Companies want to recruit the best people they can find, and they will pay to get them, passing the cost on to the consumer where possible. If the most industrious and talented people in a local area are incentivised to be public sector workers (and have probably trained accordingly from their school days), the pool of talent available to the private sector is limited. So firms relocate to places where there are relevant skills and where the public sector is less appealing financially as a career.

m4e @ 20:

“and thus spur private sector growth and jobs in Hull (since I assume Hull’s pubs, restaurants, shops and cinemas are not all owned by the state).”

Heavy-handed sarcasm gets you nowhere. As I said @ 13:
“you cannot sustain a local economy on the consumption of relatively overpaid public sector staff.”

“By paying less, talented staff might be inclined to go work in the private sector instead of in the public sector. So we will then have less good teachers, police, doctors, admin staff and nurses in Hull because the talent has moved to low but slightly higher wages in private sector jobs.”

Not necessarily, as some people have a genuine vocation to work as public servants. The deal for public servants used to be that they were paid less than the private sector but that in return they got more leave, better pensions etc. Now, they seek comparability with the private sector and more – which is not only not sustainable but also crowds out the private sector. (I used to work in economic development: I have seen this happen in a locality.)

Steveb @ 22:
“Agency work is better paid whether it be Barnsley or Central London, however, while agency working appears to be a favourable option in London and the SE, it isn’t in the provinces, this could be down to a different local culture”.

The cultural difference, as I know from NHS friends in the South East, is driven by national pay scales. As NHS pay is relatively low in the SE, it is harder to attract staff. The agency situation grew out of this; it’s possible to transfer from full-time to agency and earn significantly more as a result (whilst retaining access to the pension scheme).

This is a genuine problem for the NHS.

” This paper considers the impact of public sector
employment on local labour markets. Using English data at the Local Authority level for 2003 to 2007 we find that public sector employment has no identifiable effect on total private sector employment. However, public sector employment does affect the sectoral composition of the private sector. Specifically, each additional public sector job creates 0.5 jobs in the nontradable sector (construction and services) while crowding out 0.4 jobs in the tradable sector (manufacturing). When using data for a longer time period (1999 to 2007) we find no multiplier effect for nontradables, stronger crowding out for tradables and, consistent with this, crowding out for total private sector employment. ”

Jim, any comment on the above finding from the LSE paper? To accuse the academics of being rightwing because you do not like their findings is exactly the same thing as rightwingers do when they do not like the conclusions of a climate paper.

For goodness sake man do you realise how daft it sounds to accuse academics from the following background of being rightwing.

Spatial Economics Research Centre (SERC), London School of Economics & Political Science

Spatial Economics Research Centre (SERC) and Department of Geography & Environment, London School of Economics & Political Science

They are just doing their job of examining competing claims and seeing what can be concluded from the evidence. The alternative to evidence is we just have people make stuff up to fit their own prejudices. Public sector employment crowding out private sector employment has long been something asserted with few studies actually examining the claim. They find that it changes the sectoral composition of the private sector in that area and has a zero multiplier. How that leads you to say they are rightwing is beyond me. Would they be leftwing if they said something you wanted to hear?

In my opinion these type of issues are best looked at for the long-term effects. One should always be aware of where the economy is in the economic cycle. Reducing PS wages in depressed regions of the economy at this stage of the economic cycle would be a bad policy and would make things worse. However, that does not mean regional pay differentials would always be a bad policy. It is something that should be implemented gradually when the economy returns to a more normalised level of output.

25

I don’t doubt what you say, but how is reducing existing pay-scales and then adding a London Weighting Allowance going to assist?

I have no problem with adding a LWA on to existing pay scales.

“Government plans for postcode pay in the public sector are unfair and would be bad for NHS patients”

This report of LSE research suggests the opposite. Centrally negotiated pay agreements in the monolithic NHS mean that hospitals and other healthcare supply units can’t respond to local labour market conditions.

LSE researchers predicted that the ensuing difficulty of recruiting and retaining nursing staff in regions with relatively strong labour markets would have worse medical outcomes on average than regions with weaker labour markets where it is easier to recruit and retain nurses. And that is just what they found:

“Hospitals in the north gain from a more stable pool of nurses. Southern ones have to lean on temporary agency nurses, who can be paid more but tend to be less experienced, less familiar with the hospital and less productive. Do southern patients suffer as a result?

“The economists look at the proportion of patients aged 55 or more, admitted to hospital after a heart attack, who die within 30 days. They find a strong link between this ratio and local private-sector wages. The higher the private wage, making it harder to get good nurses in the NHS, the higher the death rate: to be precise, if the private wage is 10% higher in one area than another, the death rate is 4-5% higher.”
http://www.economist.com/world/britain/displaystory.cfm?story_id=E1_TDVGGRSS

@ 27
Reducing or otherwise is a separate issue.

What’s happening in the SE is that staff are transferring to agency (thus side-stepping the national pay constraint), so the NHS pays more, plus paying the agency. This is a pretty illogical state of affairs.

30

Well reducing pay is not another matter, I believe that there are approx 6 NHS trusts in the south-west who are attempting to do this as we speak. Also, if agency rates remain higher than NHS rates, and I’m sure agencies will increase rates to compete, where is the benefit? And as you point-out, it will only cost the NHS more and will change nothing.

See @28

29: “This is a pretty illogical state of affairs.”

Absolutely – since the Agency takes a slice for running the service. But hospitals have no choice about resorting to Agency nurses as they have to maintain required staffing standards.

I wonder how far this contributes to the postcode lottery in the NHS?

“An atlas published by the Government that maps variations in health spending and outcomes across England has highlighted some significant regional differences including amputation rates among diabetics. . . .

“Amputation rates among diabetics showed one of the most striking variations. Data revealed that the amputation rate for patients with Type 2 diabetes in the South West (3 in 1000 patients) is almost TWICE the rate in the South East. The Charity Diabetes UK was also concerned that the data showed less than half those with the disease (Types 1 and 2) had received nine key healthcare checks.”
http://www.mddus.com/mddus/news-and-media/news/november-2010/nhs-variation-atlas.aspx

There’s a sure need to demythologise the NHS.

TONE @ 24

So firms relocate to places where there are relevant skills and where the public sector is less appealing financially as a career.

And where is working in the public sector less appealing? Where the private sector pay significantly higher wages, terms and conditions than the public sector pay for the same skill sets. Now, that is fair enough, but let us assume that a company in the North East of England are having difficulty in recruiting people because the public sector have ruthlessly hovered up the entire pool of labour for there own nefarious needs. Now, okay, let us further assume that such a company baulk at paying over the odds for that labour, so what happens?

It appears that you honestly believe that the obvious solution is to relocate your business to the part of the Country where competition for those same skill sets is at its fiercest? So why would someone baulk at paying say five grand over the ‘real’ price of labour to favour the South East of England where, by your own admission, the price of labour has risen to the point that public sector employment is significantly less favourable. So much so, that London Weighting has to be introduced in order to fill certain public sector jobs?

It seems rather ironic to suggest that people in the North are losing private sector jobs to places like London, the capital city and a place riddled with public sector employment in the form of a civil service that positively eats up talent?

The very idea that a public sector could possibly crowd out private sector employment seems rather absurd when you consider that when we look at London, the public sector has not exactly suppressed private sector employment, has it? In fact when you look across the Country, public sector employment very much has quite the opposite effect to the one you suggest.

Consider RAF Lossiemouth and RAF Luechers in Scotland. Economic activity has greatly increased in these areas since they housed RAF bases. Are you suggesting that the communities have seen private sector jobs crowded out since they became RAF bases and that the private sector jobs will flood back in to fill the vacuum left by RAF personnel?

In fact following on from what you are saying, we should stop recruiting for the army in economically poor areas of the Country because such activity is crowding out private sector employees. Think of the fantastic jobs places like Methil could produce if only the Black Watch stopped recruiting there.

Not necessarily, as some people have a genuine vocation to work as public servants.

Then there is no crowding out then, is there? If these people are destianed to be social workers, for example, then the private sector are not trying to recruit such people are they?

Richard W @

Jim, any comment on the above finding from the LSE paper? To accuse the academics of being rightwing because you do not like their findings is exactly the same thing as rightwingers do when they do not like the conclusions of a climate paper.

That is assuming that the Laws of economics are as immutable as the Laws of Physics. It is not that I think that economists are ‘Right Wing’ as such, but I think economists are conscious of their audience, or more specifically their clients.

I think we can legitimately use terms as ‘Left Wing economist’ and we would generally understand the term to mean that their Left Wing ideology influences the economics. You could even stretch the term Right Wing historian to an extent. Whereas the term ‘Left Wing physicist’ or ‘Left Wing Chemist’ would be meaningless.

Now, that is fair enough, but let us assume that a company in the North East of England are having difficulty in recruiting people because the public sector have ruthlessly hovered up the entire pool of labour for there own nefarious needs. Now, okay, let us further assume that such a company baulk at paying over the odds for that labour, so what happens?

They employ fewer people than they otherwise would, because the cost of labour is higher.

It seems rather ironic to suggest that people in the North are losing private sector jobs to places like London, the capital city and a place riddled with public sector employment in the form of a civil service that positively eats up talent?

Have a look at this map that shows public spending as a proportion of GDP across the UK. It’s from those dastardly hard-righters at the BBC. (It’s also from 2008, which means that this is pre-recession).
http://www.bbc.co.uk/blogs/thereporters/markeaston/2008/06/map_of_the_week_public_spendin.html

The CEBR’s comment might be relevant to this discussion too:

Parts of the UK have become so dependent on public spending that it can crowd out private enterprise in these regions and countries. It is partly a chicken and egg situation – public spending in these regions is high because they are doing less well economically, but on the other hand a high public spending share can make a revival of the private sector difficult to achieve. And the latest data suggests that this problem is getting worse.

Tim @ 33

Why would that be, though Tim? What is the rationale behind that? What kind of jobs are we talking about? Are we saying that no one in the North of England can employ an accountant because all the ‘best ‘ ones are in the public sector? Are we saying that no one is willing to stack shelves because they would rather work as porters?

Tim that is a nonsense and you know it

http://www.salarytrack.co.uk/average-accountant-salary.html

No, not a detailed study and a bit crude, but okay for the level we are dealing with.

So, in other words if I want to employ an accountant in Scotland I would have to shell out roughly thirty five grand, but to move out of Scotaland to the South East of England, that same job would be twelve grand more?

Have a look at this map that shows public spending as a proportion of GDP across the UK. It’s from those dastardly hard-righters at the BBC

Pretty much meaningless because what we are talking about are the number of jobs rather than a percentage of GDP spent on those jobs. The fact that Scotland, for example, has about half its GDP spent on public sector jobs tells us nothing, because we are still going to need schools, hospitals, local government etc.

I realise you are trying to imply that public sector jobs have swallowed up those jobs, but seriously there isn’t a shread of evidence for that.

However, one things stands out. Despite the fact that London is home to huge offices choc full of civil servants, some of the biggest ministries are there, London has somehow managed to overcome such a huge handicap to the extent that private sector employment has dwarfed that of the public sector. Despite having these huge ministries, it appears that the downtrodden private sector have somehow managed to compete with these lavish wages to the extent that private sector jobs are better paid than the public sector?

It is almost like, far from being a burden, those public sector jobs act as an attraction to the private sector. Far from driving those jobs out of London, it appears that the private sector actively seek out such people. You could even go so far as to say that your average Londoner has greatly benefited from being at the centre of Government.

Surely if you and TONE where correct, London would be stagnant under the weight of the huge public sector burden it has to carry?

Why would that be, though Tim? What is the rationale behind that?

What, you mean why would a company employ fewer workers if the cost of employing workers went up? Do I really need to explain that?

I realise you are trying to imply that public sector jobs have swallowed up those jobs, but seriously there isn’t a shread of evidence for that.

I just sent you a link to a 35 page paper specifically on this point. Look, I understand that you don’t like the idea of crowding out. I get that. But you’re not going to persuade me that it doesn’t exist by a combination of “stands to reason” and dismissing all conflicting evidence with a wave of the hand.

Tim J @ 35

What, you mean why would a company employ fewer workers if the cost of employing workers went up? Do I really need to explain that?

So, when the price of labour in the South East has risen above that of the rest of the Country why hasn’t employment fell accordingly? Why are people more willing to employ people in high wage parts of the Country than lower waged areas? If price was the main factor, why are wages higher in the South East than the rest of the Country? There is obviously more to it than a simplistic price of labour dynamic going on.

I just sent you a link to a 35 page paper specifically on this point.

None of which appears to relate to the real World though. I cannot see how opening a school ‘crowds out the private sector’, You cannot surely be suggesting that unemployed people in the North East are being prevented from taking jobs because other people have jobs in the public sector? That is a nonsense, because the South East employ people in the public sector as well, yet thy have lower unemployment.

You support a Party that is now ideologically opposed to the provision public service and he people who provide them, I get that, but to trot out bullshit just confirms that this is a pretty sick ideology.

So, when the price of labour in the South East has risen above that of the rest of the Country why hasn’t employment fell accordingly?

Because the price of labour in the South East is effectively set by the market. That is, it is where supply meets demand. In other words, the price of labour is high in the SE because there is so much demand for it.

You can’t simulate this high demand by artificially increasing the price of labour.

None of which appears to relate to the real World though.

Does this just mean that you disagree with the paper? On what basis?

“national pay scales that pay public sector staff above the market rate in economically depressed regions will only make the situation worse because those pay rates mean that the public sector crowds out the private sector by incentivising employees to seek public sector employment. Firms cannot then recruit staff of the appropriate calibre and either relocate to another region or close”

Utter crap, Tone – there is precisely NO EVIDENCE WHATSOEVER that this actually happens:

http://www.tuc.org.uk/tucfiles/265/TUCresponsetoOME.pdf

(It doesn’t matter that this research was commissioner by the TUC – it’s still independently produced).

“The idea that the private sector is being “squeezed out” as a result of an inability to match public sector wages is not credible, particularly in the current economic context. For example, the North East has both the lowest overall wages and the highest unemployment rate of any of the English regions. With unemployment so high, an otherwise healthy private sector would be able to recruit irrespective of public sector wages. That this is not happening suggests that the problem lies elsewhere, most likely in low demand and the unavailability of affordable credit.

Reducing public sector wages in struggling areas would lead to fewer jobs, as a further fall in consumer spending would drive more private sector enterprises out of business. The failure of these enterprises would then cause further ripple effects. Economists estimate that this could double the impact of any public sector wage cut. In addition, falling public sector wages could trigger a race to the bottom in private sector pay in these areas, further squeezing spending power and damaging the economy.”

Jim @ 32, 34 & 36:

Since you do me the honour of not abusing me with synonyms for the birth-canal and orifice, I will reply, but briefly as the thread has slipped off the LC homepage, and you may never read it.

We are talking about a mixed economy here: up to a point, a mixed economy stimulates growth – and delivers social goods in health, defence, education, sewage, fire protection, policing, etc, etc.

However, once the public sector share of the economy gets to above 33-37.5%, ‘crowding out’ apparently occurs. Regional GDP figures show that the public sector accounts for more than 50% of Scotland’s gdp, and about 60-65% in the north-east/west of England and N Ireland.

This is not healthy economically. And there is little doubt that private sector employment would gradually increase if public sector wages were frozen and allowed to decline relative to private sector ones. And then manufacturing might very slowly revive – with high-tech, high-productivity, highly skilled jobs…

And that’s the only way you can achieve a proper economic revival in depressed regions…Relying on crude Keynesian aggregate demand (as m4e does) just means that we create jobs by serving cappuchinos to the public service elite….

KR @ 38:

Sadly, anything that emanates from the TUC is propaganda – see Duncan Weldon’s posts on LC, which often ‘spin’ the facts. Moreover, if you commission a report, you help determine its conclusions. I know, because I was once a City management consultant, selling high-class bullshit like this TUC report.

Tim @ 37

Because the price of labour in the South East is effectively set by the market. That is, it is where supply meets demand. In other words, the price of labour is high in the SE because there is so much demand for it

But the public sector has not ‘crowded out’ anyone, though has it? It turns out that when ‘the market’ pushes up the price of labour, the private sector stumps up, they do not leave the market, they find ways to out compete each other (and the public sector). The public sector of course are legitimate user of labour, same as everyone else.

What you and TONE are suggesting is that in the North of the Country, if any player in the market raises the cost of labour then everyone else will toss their hand in and give up competing for labour. That strikes me as a rather implausible and exactly the opposite of what actually happens.
I genuinely find it incredible that you would hold up such ideas up in the face of overwhelming evidence. There are not an endless stream of budding businesses unable to get a foothold in the labour market because of the public sector. You know that and you know I know that too.
You cannot seriously tell me you think that the number of qualified people from degree level downwards in a given region exactly matches the requirements of the public sector and that all those people spontaneously decide to spurn the private sector to take up positions in middle management of the public sector, thus leaving the engineering firms empty handed. That does not make sense.

However, one positive thing to come out of this is that you and TONE have now became defenders of academic integrity and I look forward to joining forces when the next Global Warming debate kicks off. No doubt we will scoff when someone like Pagar dismisses the laws of Psychics. Youy will be able to spring to our defence.

TONE @ 39

And there is little doubt that private sector employment would gradually increase if public sector wages were frozen and allowed to decline relative to private sector ones.

Is there? Is there fuck any evidence outside your tiny little bigoted head.

It may have escaped your notice that we have been in observing this evidence for the last thirty years. When you cunts started destroying jobs thirty years ago the private sector did not flood into these areas, quite the opposite in fact. When the Tories smashed down Nationalised industries, the private sector did not fill the void, they closed down soon after because the industries that sustained these communities collapsed. In fact, what happened is that public money was used to attract inward investment. Not the free market, but taxpayers and borrowed money was used to bribe American and Japanese factories to come here. Once they left mid 1990s, business did not flood in either.
You Know some of us are actually old enough to have actually seen what had happened, this is not an academic exercise for us, this is real life.

I genuinely find it incredible that you would hold up such ideas up in the face of overwhelming evidence.

I sent you a 50 page academic paper detailing the evidence behind the theory of crowding out, which comes to a specific conclusion. I quoted the conclusion. The evidence has been flowing only one way in this conversation.