Total Reward and pensions in the UK in the public and private sectors

an article by Alexander M. Danzer (University of Munich (LMU), CESifo & IZA Bonn, Germany) and Peter J. Dolton (University of Sussex & Centre for Economic Performance, London School of Economics, UK) published in Labour Economics Volume 19 Issue 4 (August 2012)

Abstract

Recent controversy has surrounded the relative value of public and private sector remuneration. We propose a comprehensive measure of Total Reward (TR) which includes not just pay, but pensions and other ‘benefits in kind’, evaluate it as the present value of the sum of all these payments over the lifetime and compare it for the highly educated in the UK public and private sectors.

Our results suggest that TR is broadly equalised over the lifecycle for highly educated men while highly educated women have a clear TR advantage in the public sector by the end of their career.

We suggest that the current controversy over public–private sector pension differentials and the perennial issues of public/private sector pay gaps requires a lifetime perspective and that the concept of TR is appropriate.

Highlights

► We define the most comprehensive measure of total job remuneration, Total Reward.
► We estimate Total Reward differences between public and private sector in the UK.
► Our approach takes a novel life-cycle perspective.
► Men would optimally switch sector while women are better off in the public sector.
► We find that sector switching behaviour follows the actual Total Reward incentives.

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