Mobility of public and private sector workers Jonathan Cribb OME Reward in the Public Sector: Research Seminar Friday 10 th July 2015 For more details see: Cribb and Sibieta (2015) Mobility of public and private sector workers (http://www.ifs.org.uk/publications/7775)
General government employment (headcount) General government employment since 2004-05 5.8 5.6 5.4 5.2 5.0 4.8 4.6 4.4 General government employment OBR forecast Forecast incorporating 1% pay awards from 2016-17 4.2 Source: IFS calculations using ONS Public Sector Employment Statistics Notes: Each financial year refers to the final quarter of each year. Excludes reclassification of workers in English Further Education and Sixth Form Colleges. Projections are based on OBR forecasts from July 2015. The second projection adjusts OBR forecasts for the announcement of 1% pay awards from 2016 17 to 2019 20.
Private sector employment (million) Public sector employment (million) Private and public sector employment 25.5 25.0 24.5 Private sector employment (LH axis) Public sector employment (RH axis) 8.5 8.0 7.5 24.0 7.0 23.5 6.5 23.0 6.0 22.5 5.5 Source: IFS calculations using ONS Public Sector Employment Statistics Notes: Excludes the effects of reclassification of workers in English Further Education and Sixth Form Colleges and of privatisations and nationalisations of financial corporations and Royal Mail
How have public workforce cuts been delivered? Two main ways a government can cut the public workforce 1. Reduce inflows (e.g. recruitment freeze) Reduced inflow of former private sector workers Reduced inflow of workers from non-employment 2. Increase outflows (e.g. redundancies) Increase number of public sector workers moving to private sector Movements of former public sector workers into non-employment Welfare consequences will in large part depend on importance of movements between sectors vs net movements into non-employment Movements between sectors easier if skills are transferable Easier and more likely for younger workers Mobility less likely for sector-specific occupations
Our contribution Show overall levels of mobility between sectors over time Decompose public workforce cuts into contribution from: Reduced inflows from private sector Increase outflows to private sector Net outflows to non-employment Examine wider levels of mobility to provide context on level of fluidity and flexibility across public and private sector labour markets Levels of mobility within sectors Levels of geographical mobility
Calculating movements between sectors Focus on Annual Survey of Hours and Earnings (Panel Dataset) as it allows us to follow a 1% sample of employees Take sector in a given year a base year Ideal approach would classify sector moves as those observed in a different sector as compared with previous year BUT...large number of individuals have missing data in some years Could reflect unemployment, low hours, retirement or missing data We classify movements between sectors as those: In a different sector as compared with the last year (if observed) Or, in a different sector as compared with two years ago (if last year s observation is missing)
Proportion of sector Increase in movement of public sector workers to private sector since 2010 6% Public to private - men Public to private - women Private to public - men Private to public - women 5% 4% 3% 2% 1% 0% Source: IFS calculations using ASHE Panel Dataset
Proportion of sector Sectoral mobility at its highest for younger ages 4% 3% 2% 1% 0% Public to private - men Public to private - women Source: IFS calculations using ASHE Panel Dataset Notes: Results are pooled across all years from 2000 onwards. Age Private to public - men Private to public - women
Decomposing public workforce cuts Change in public sector workforce = Inflow from private sector + Outflow to private sector + Net inflow from non-employment Change in public sector workforce measured in public sector employment statistics Inflow and outflows to private sector measured in ASHE Net inflow from non-employment represents a residual Caveats Net inflow from non-employment includes both effect of reduced inflows (e.g. Recruitment freezes) and outflows (e.g. Redundancies) Non-employment includes self-employment here Employment only measured in April; misses movements into nonemployment between April each year
Percentage of public employment in previous year Decomposing changes in the public workforce 8% 6% 4% 2% 0% -2% -4% -6% -8% Outflow to private sector Net inflow from non-employment Inflow from private sector Total change in public sector employment Note: Each year refers to the change in employment between Q2 of the named year and Q2 of the previous year. Public sector employment is adjusted for reclassifications Source: Authors calculations using the Annual Survey of Hours and Earnings and ONS Public Sector Employment Statistics.
Headcount indexed to 100 in 2010Q1 Change in public employment since 2010Q1 105 100 95 90 85 80 75 Education NHS Public admin HM Forces Police (incl civilians) Other Health and Social Care Other Gen Govt 70 Source: IFS calculations using ONS Public Sector Employment Statistics Notes: Excludes reclassification of workers in English Further Education and Sixth Form Colleges. Changes in employment in public corporations not shown
Percentage of employment in previous year, averaged over three-year periods Decomposing changes by area of employment 10% 5% 0% -5% -10% -15% 2007 10 2010 13 2007 10 2010 13 2007 10 2010 13 2007 10 2010 13 NHS Education Public admin Other Net inflow from non-employment Outflow to elsewhere in public sector Outflow to private sector Inflow from elsewhere in public sector Inflow from private sector Average overall change Source: Authors calculations using the Annual Survey of Hours and Earnings and ONS Public Sector Employment Statistics.
Summary of decomposition results Overall changes Initial cuts to the public workforce quite sharp in 2011 and delivered by reductions in inflows from private sector and increase in net outflows to non-employment. After 2011, pace of cuts slowed, outflows to the private sector increased and were delivered with relatively few people moving out of employment Changes by part of public sector Cuts to the public workforce smallest in the protected areas of NHS and education Largest cuts in public administration and other areas of public sector Unclear if workers in public admin and other parts of public sector will continue to find jobs in health and education
Proportion of public/private workforce Declining levels of within sector mobility 16% 14% 12% 10% 8% 6% 4% 2% 0% Changed job within public sector - men Changed job within public sector - women Changed job within private sector - men Changed job within private sector - women Source: Authors calculations using NES and ASHE Panel Dataset
Explanations for declining levels of within sector mobility Mobility within public sector close to lowest level in last 30 years Seems to reflect an ageing of the public workforce Mobility within private sector also close to lowest level in last 30 years BUT...this is seen across all age levels Reflects declining levels of movements across firm rather than within firm Partially reflects declines in redundancies But, also likely to reflect reduced voluntary movements More work needed to understand if declining levels of within sector mobility reflects barriers to moving from less to more productive jobs
Proportion of public/private workforce Lower levels of geographical mobility in public sector 10% 8% 6% 4% 2% 0% Changed region - men in public sector Changed region - women in public sector Changed region - men in private sector Changed region - women in private sector Source: Authors calculations using New Earnings Survey Panel Dataset
Conclusions Government is expected to make further cuts to public sector employment, having already made large cuts 1% average pay awards from 2016 17 reduces projected workforce cuts Although there was some net outflow to non-employment in 2011, more recent cuts have been delivered without a big increase in net outflows to non-employment Increase outflows to private sector and reduced inflows from private sector Will this continue? Decline in within sector mobility in the private sector More work needed to understand if this has negative consequences Relatively low levels of geographical mobility in public sector Former public sector workers looking for jobs within existing region