Monday, 7 July 2014

Union action may be counter-productive – especially over Public Sector pensions


The Tories, unsurprisingly, are using the upcoming Public Sector one day strike as a reason for a bit of Union bashing.

As a Director of a large private sector Pension Fund for four years and as a writer and commentator on Pensions matters I have thought a bit about the subject of the disparity in benefits between the two sectors. It isn't just pay (as Tim Montgomerie points out in the article in “The Times”) that favours the Public Sector, it's pensions as well. Most public sector employees are in Defined Benefit (DB) schemes which are still open to new recruits. In the Private Sector most of these schemes are closed to new entrants who are offered only the far inferior Defined Contribution (DC) scheme instead. (With the Budget changes the reality that such schemes are not proper Pension schemes anyway but workplace savings devoid of proper Pension guarantees was made crystal clear).

In future private sector employees, except for the fatter cats at the top, can expect to work longer and enjoy much lower retirement benefits than their opposite numbers in the public sector. This may skew some in the employment pool towards the public sector rather than the private  - if the jobs are there. As most public sector schemes are unfunded this will continue to be a large part of Government spending. It is true that post Hutton public sector employees retirement benefit prospects are somewhat lower. But they are still far, far more generous than the private sector will offer.

We are, in the private sector, largely in a post Union world. Workers’ rights, including pay and pensions, have slipped so that there is less job security, lower (comparatively) pay, hugely reduced retirement benefits, longer working lives etc. The destruction of collective bargaining means that there are few if any, fora for negotiation and debate. Nobody protects workers interests any more. In the public sector this is not the case.

Tim Montgomerie and many others on the Right want the public sector to be more like the private sector - code for reducing Union power and allowing lower pay and lower benefits to be forced on the workforces. Although I do not believe that the Unions should be striking at this time - especially over pensions - I welcome their continued presence in the public sector world and greatly lament their disappearance from the private sector. It's back to the future when Victorian employment practices become the norm and there is nobody to stand up for the workers any more.

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