As usual, the partisanship of the UK media makes it a job to distinguish between the signal and the noise on today's public sector 'day of action'. And as usual it takes a complex situation and grills it until it becomes a hunk of shoe leather. And further, it is not necessarily the case that the grounds for action are entirely economic (covering as they will perceived senses of injustice, dispute about the social purpose of activity or the political sense of power being used against the least able to defend themselves). And it's perfectly respectable that these issues should be lumped in together as even if we take the simply economic (as I'll call it) rationale, it will be conditioned by what we believe the state of the world is or will be and what our valuations for things within that world might be.
This is all be way of saying that the answer to @Schrodingerskit is: It's complicated.
That being said, let's get into some of the economics underlying the dispute.
- The casus belli of the public sector unions is the Government's proposal to increase pay ins to pension schemes, for retirement ages to be raised and for pensions to be based on career average rather than final salaries. I don't believe that there is a calculation that says that this would lead to any public sector workers being better off, although Tim Farron of the Non Lib Non Dems did say that low to middle income workers would be 'at least no worse off'. In any case, if one's working or living standards are under danger of deprecation, one is likely to be suffering a loss of utility and therefore one would want to protect that level of utility. (Let's not forget that in some areas, a small change in money can have a very large concomitant change in utility because one either starts with little money or one has high costs of basic living and therefore a small change can have a big effect on what we are able to buy. Ok rent. ). Can any of us blame people for being angry? I don't think anyone reasonably could.
- Set this against conditions in the private sector and the case looks less favourable. According to the Civil Service 78% of the British workforce is in the private sector. Final salary pensions have been closed for some time at least to new entrants, so explaining why you're striking to the average private sector worker is a little difficult. It is also asserted that the median public worker enjoys also a higher salary than the median private worker (28K against 25K since you asked, although I accept that comparisons are most invidious). Might it not therefore also be justly put that strike action is about the relatively privileged seeking to maintain benefits that the greater part of the workforce do not enjoy. I'd say that's an arguable case.
- Set both 1 and 2 against the 'austerity drive'. (I use inverted commas the same way I use air quotes when talking about 'austerity'. This isn't austerity. It might be announced that it is. But it is not. Government spending, and the defecit are both rising at the moment. I may not like current economic policy. I really don't. But to call it austerity in the UK is not true or fair).
Currently, economic growth is less than one percent (in the zone of it's not really growing but it sort of is, and a very good corrective to anyone who thinks zero growth economics is automatically a good thing). Falling living standards are occurring across the board as wage growth falls behind inflation for the most part involving everybody. We are not likely to be able to grow our way out of recession, we are not likely to be able to cut our way (with debt at 90 odd percent of GDP, OECD figure) into the freedom to spend more, and we the more we investigate other options the more they seem to be found wanting. The government's latitude for manoevre is seriously restricted at the moment. In fact the one bright point in the firmamament is that we own our own currency and therefore can use financial repression (using inflation to pay our debts by holding interest rates below inflation and forcing banks to to buy more of our bonds, hence the negative real returns on gilts at a time when Italy is paying 7%+ and Portugal 13%).
The reason we're not going to be able to grow out of debt is that everyone (public and private) is so indebted that their financial stability is dependent on reducing their level of debt. The evidence overwhelmingly is that households are doing so:
This holds a fortiori for our banking system (remember that that is where all this started, at least according to the conventional narrative).
In short this is pointing out that in the economic context, the 22% of the workforce who are forming the backbone of the strike are really asking for the moon on a stick at the moment. Really. Whatever the justice or not of the case for striking, the idea that money is available to fulfill their demands, even if The Cleggeron wanted to, is complete nonsense pie. Even if Ed Humanoid were in charge, the same would hold. - But is the public sector more socially useful? I think this is the biggest fallacy of all. Some public sector jobs are justly described as socially useful. Some are not, beyond the case that could be made for any job at all, down to my local crack dealer (he serves a market, creates value and keeps his family. after all.....) You do not have to be F.A.Hayek to believe that the larger a public sector is, the more likely it is that the persons within that sector are not creating value either privately or socially. Take my job for one (go on. Take my job....): I teach business strategy to undergraduates. By far the most likely destination for them after graduation is in consultancy or banking. Am I creating social value by creating more bankers or consultants? I really don't know and I find it impossible to quantify or even arrive at a qualitative understanding of whether or not I do. I do know that I often have to try to explain to my father, who has spent most of his life working insane hours for very little in the catering industry, why his taxes are paying for my benefits. I think I can make the case on the basis of his supporting a family member. I find it hard to do so on the general principle. That's the honest fact.
More generally, the classical theory that equilibrium wages depend on the marginal product of labour is quite wrong. Most people do jobs where the marginal cost of employment and the marginal product are both obscure. There are many people in organisations, both public and private, for whom we will never be able to tell exactly what the private benefit of their activity is, let alone the public benefit. Trust me. I've worked for several. - The other story. Yes, there is another story, to which I alluded in an earlier para. I'll get onto it, honest, but first I've got to explain that there is a fallacy that goes "The 90s were a libertarian era. As a result the banks got too uppity. We all had to bail them out when they failed. Now we're all paying for it". It's fallacious because it ignores the complicity of government, and indeed the broader swathe of society, in the banking mess and it ignores the true actions of government sector over the period. Instead I would prefer a narrative that said Government enjoined in a faustian bargain with the financial sector, looking away as the actions we now justly call batshit insane served the aims of Big Politics. After the 2000/01 bust (remember the dotcom crash anyone?), Governments ran up deficits both to support the markets and to help with their re-election. Sometime around 2007/08 the chickens came home to roost, as the clever financial engineering that the Government was only too happy to praise the city for turned out not be so clever. Finally the bankers had to come topper and tailcoat in hand to beg some spare change from us all.
It is simply not true that libertarianism has any dog in this fight. Take for instance the following, and index of public sector employment for 3 general categories, 1997=100:
Or the long run behaviour of government deficit:
Notice that over the boom years, we were still a net borrowing nation. (Keynes would turn in his grave) and it is not obvious that those spending the money were doing so, as Keynes would have preferred, to fund investment. Whilst the cost of the bailout is about half of our total debt, we were running defecits before then. Again, you do not have to be F.A.Hayek to believe that when money is cheap, everyone acts like a dickhead on a coke binge. Over this period capital was cheap. Sense was, however, in very short supply. It is very unlikely that we could identify very much of the spending as having been socially useful if we evaluate it against where we think the priorities are now. For instance let me take one of my betes noires, the fake healthcare charities. Up until this year Alcohol Concern was paid £500K a year of our money to tell lies in support of their pet policies. I'm guessing that if some fraction of that money had ended up on decent amenities in Tottenham we might not have had the August riots. Or how about the craziest figure I've ever seen from the Crime Survey: Public Order Offences and Offences against the state doubled over the life of the labour government, at a time when crime was falling (and it hasn't been as low as it is now since the 1950s!). Take the cost of all these offences, prosecutions, mis-allocations of money and awards to the mates of the people in power and we ought to be talking about a scandal as big as that of the bank bailouts. Why aren't we? - Overall: There really is no simple answer. You can set the moral case that people should not expect the reduction in their working conditions against the moral case that when resources are short no-one sector should suffer more overall. The answer is not easy to disentangle with the eye of an economist, although we can spot some of the confusions. But is it right? is it wrong? This really does have a lot to do with how you believe the world is, which in turn conditions how you see the world. And how we see the world is rarely a function of how the world really is.
That all said. I need a cuppa.
