Public sector outsourcing is ‘driving down wages’

Will Green is news editor of Supply Management
11 December 2013

10 December 2013 | Will Green

A think tank has said outsourcing is “driving down wages” with private sector workers paid less for doing the same job as public sector staff.

In a report the New Economics Foundation (NEF) said there are around 500,000 private sector workers providing public services and the “evidence suggests that the shift from public to private employment can result in diminished pay and employment rights”.

The report said: “In the public sector a carer will typically earn between £9 and £11 per hour, but in the private sector the prevailing rate is much lower, at between £6.44 to £7.38, and therefore below living wage.”

NEF said there was a total of one million low paid workers providing public services and called for an end to public sector pay freezes and for all staff to be paid the living wage.

The report said: “The evidence suggests that the shift from public to private employment can result in diminished pay and employment rights as well as a prevalence of zero hour contracts, especially among care workers.

“This partly reflects the fact that work that moves from the public to the private sector is also removed from a national system of pay bargaining with much less worker representation via unions.

“In addition, research suggests that the competitive tendering process can have a depressing effect on public sector pay as in-house teams compete on price with private providers to retain service provision.”

Helen Kersley, senior economist at NEF, said: “Up to now, it was assumed low pay was confined to the margins of the public sector. But take into account the 500,000 low-wage workers employed by outsourced service providers and you can see the problem runs a lot deeper than that. As local authorities struggle to cut costs they’re leading a race to bottom, commissioning providers that pay workers less than they need to live on.”

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