1) Diff bet’n pvt & pub

 From: "Dick Tinsley"

 Date: Sun, 9 May 2004 16:42:44 -0600

Thoughts from the Moderator - Week 3Perhaps I can open up a new front to the
discussion that may have some bearing on how DFID or other donors which to
proceed.

We have had much discussion on the role of government in agriculture

development much of it expressing considerable reservations on what it can
accomplish. May I toss out a brief summary:

The public sector needs to concentrate on communal support services such as

roads, postal services, tele-communications and perhaps research and extension
provide it can do so without stalling.

This would also include policies for prices with due consideration for rural
and urban sectors of the economy that will assure the farmers a reasonable
return on the production that will justify the necessary inputs for national
self-sufficiency and reasonable prices for the urban populations. It would
also include the necessary statistical surveys that will identify shortfall in
time for arrange for essential imports and license exports for surpluses.

I also include in this large irrigation system that includes multiple villages
and multiple secondary canals etc. and thus become a communal concern.

The private sector is more efficient in providing the direct individual support
services providing inputs, marketing produce, support services such as contract
mechanization, etc. They are operationally too efficient and can rapidly
respond to opportunities such as the private traders appearing out of the bush
in southern Tanzania to buy up the rice crop and by-pass the project
cooperative and mill. Or the shops outside Basra in post-conflict Iraq being
able to supply imported tomato seeds even before the banking system could be
reestablished.

When the public sector tries to become involved in direct individual support
via public sector mandated cooperative or parastatals, they quickly become
totally inefficient and actually become a disservice to the farmers and
consumer alike.
Is that a reasonable partitioning?

2)

The public sector is the part of the economy where goods and services are provided by the government
or local authorities. These goods and services are sometimes provided free and in other cases
consumers have to pay a price. The aim of public sector activity is to provide services that benefit the
public as a whole. This is because it would be difficult to charge people for the goods and services
concerned or people may not be able to afford to pay for them. The government provide these goods
and services at a cheaper price than if they were provided by a profit making company. The public sector
accounts for about 40% of all business activity.

The private sector consists of business activity that is owned, financed and run by private individuals.
These businesses can be small firms owned by just one person, or large multi-national businesses that
operate around the world (globally). In the case of large businesses, there might be many thousands of
owners involved. The goal of businesses in the private sector is to make a profit.

3)

Critics of the public sector are very fond of saying that average pay is higher in the public sector
than in the private sector. They like to imply that this there is something new about this, and that
this supports their view that public sector staff are especially privileged.

But our new analysis shows that it is much more complicated than that and the truth is that pay
is less unequal in the public sector – those at the bottom get a bit more and those at the top get
less than their equivalents in the private sector.

The obvious retort to the small-state brigade when they harp on about average pay is that the
private and public sector workforces are different. As the private sector employs more unskilled
workers on the minimum wage than the public sector, and the public sector has a high proportion
of professional workers (such as teachers and doctors) it is not surprising that average pay is
higher in the public sector.

Additionally the composition of sectors can change over time. If the public sector transfers lots
of low paid jobs to the private sector through contracting out, average pay in the public sector
will increase even if no-one gets a pay rise.

What these public sector critics want us to think is that people doing the same job get a better
deal if they do it in the public sector than the private sector. But comparing either mean or
median pay between the two sectors tells us zilch about that.
In a previous post I showed that there was nothing new about a higher median wage in the public
sector.  I was able to get figures going back to 1984 from ASHE and the public sector full-time
median wage has been higher every year since then.

But while there is not a steady increase in the gap each year by any means (and indeed it has
fallen in recent years with some tough public sector pay rounds) it is true that the gap is now
bigger than it used to be.

There is also evidence to suggest that pay in the public sector is more compressed than in the
private sector. The better paid tend to get less than they would in the private sector, while the low
paid do slightly better in the public sector.

However not all jobs in one sector have straightforward equivalents in the other – or there are
other problems with making direct comparisons, for example private schools are not really
equivalent to state schools and there are far fewer of them.

But what we can do is compare the pay of people with similar levels of educational qualification
as the government’s Labour Force Survey asks people about where they work, what they are
paid and their qualifications. (The key difference with ASHE is that the LFS asks workers about
their pay and conditions, while ASHE asks employers.)

This also allows us to see how the make up of the workforce has changed over time too as it can
show us  for example the change in the share of the public sector workforce whose highest
qualification is at A-level standard.

Unfortunately the figures don’t go back as far as ASHE (and its predecessors), so I asked my
colleague Paul Sellers – our LFS stats whizz – to dig out the most recent figures and those of ten
years ago.

Let’s first look at the composition of the workforce in the two sectors. As the table shows there
has been a big growth in employment of graduates in the public sector over the last ten years –
much bigger than in the public sector. Even in 1998 the public sector was already employing
more graduates. Given that graduates are paid more than others, this in itself would tend to make
average public sector pay higher. There are quite significant decreases in the proportion of public
sector staff with higher education short of a degree (which we will call diplomas for simplicity)
and those with other qualifications.

4)

Public sector HR professionals must learn from the private sector.I am aghast at the lack of
practical and timely approaches when it comes to managing performance in the public sector. In
fact, I find it laughable. Only recently I was in discussion with a public sector HR practitioner
who discussed with me a number of performance issues he was managing, When I asked how
long the employees had been performing so poorly, he went rather pink and said: "Around six
months". I nearly choked on my Yorkshire pudding...

Is it no wonder our public services are in such a state when HR bureaucracy stands in the way of
disciplining poor performers and dismissing them? I recall my own time working in the NHS and
how much time was wasted talking about ridiculous HR initiatives such as the inclement weather
policy. HR managers in the public sector need to get more proactive when managing
performance, which is actually very simple.

I met with Linda Head, group HR projects manager at Archant, a few weeks ago and sounded
her out on how she would manage performance. Quire rightly she commented that:

"Ignoring poor performance is never a good idea in the long run – it will lead to
discontentment within the team and affect the motivation of the higher performers, and
possibly even result in a time-consuming grievance being raised. It will have an impact on the
manager’s credibility within the team and among peers. More importantly, over time it could
lower the performance of the whole team as standards drop."

I agree totally with Linda, and she explained how she managed performance matters fairly yet
proactively. A lot can be learned from private sector practices. Perhaps if public sector HR chiefs
take note, we will begin to see gradual efficiencies in the way we are treated by the doctor's
receptionist and local authority employees.