Public Sector Pay & Pensions

This article is in response to some comments about this link on public sector pensions which points out the high cost of funding these.

“We pay your pensions” — why, yes. And your salaries. How very generous of us. Except that “we” also use the services “you” provide. The government is not in fact a charity run for the benefit of its employees, and I don’t think you should pretend that it is.

Of course we all use public services so why shouldn’t we pay for them?

The reason this argument fails is that public sector and private sector services are essentially different in their nature:

Imagine a private sector company that turned up at your door and said they were going to wash your windows every week for £50. You might think that was a good deal, or you might think it an outrageous price. You might prefer to clean your own windows or pay a neighbour to clean them for you.

This company however is not offering you a service, it is telling you what it is going to do for you and how much you will be charged. They are the “Official Window Cleaning Company”. The company then proceeds to do a very poor job of cleaning your windows, they don’t always turn up and when they do the windows are covered with smears.

You complain to the company who promise to investigate, but nothing ever happens and the service remains poor.
You can of course “go private” and employ another company to clean your windows, but you must still pay the “Official Window Cleaning Company” their £50 a week whether you use them or not.

The employees of the “Official Window Cleaning Company” have 100% job security.The “customers” can’t sack the company so the company has no need to sack poorly performing cleaners.

They have some of the highest rates of absence in any business but the company doesn’t care because it can just employ more staff and increase the charge to the customer.

The staff are paid more than private window cleaners, but the extra cost is simply passed on to the customer.

They have gold plated pension plans that mean they can retire after work on most of their previous salary.

All this is very costly, but the Company just puts up the weekly charge from £50 to £90 and this covers the cost. The customer can grumble but he either pays or the “Official Enforcement Officer” will lock him up until he does.

In the private sector such a business would not survive. If people can chose to move to a more effective service provider they will. If the company tries to prevent this it is called a “protection racket” or “extortion” and the people behind it go to prison.

In the public sector this is the modus operandi. You can’t empty your own bins, sweep your own streets, pay for your own education or medical coverage. You can of course do these things, but you still have to pay the “official service providers” with your taxes as well.

So yes we do use the public services, but that does not mean we think they represent good value for money, we simply don’t have a choice.

“I’m unconvinced that everything could be done more effectively in the private sector on account of the fact that, say, nursing, teaching and refuse collecting don’t seem to be being performed ineffectively at present.

The fact that something does not appear to be ineffective, logically does not imply that it can’t be done more effectively. The horse and cart was effective at moving people from A to B but the motor car is more effective. All the technical progress of human history has been driven by not accepting that just because something works it can’t be done any better.
In the public sector it is very difficult to establish value for money. You say that refuse collection is not ineffective, but does it cost each homeowner £10 a week, £100 a week or £1,000 per week. What price would a private contractor charge if given the right to compete on a large scale ? Without this information it is impossible to know how effective the current services are.
All you can say is that they perform the service to an acceptable standard. Historical evidence supports the view that private enterprise is usually more effective than state enterprises. E.g. check out the standard of living in say Hong Kong vs North Korea.

Perhaps there’s a case to suggest privatisation increases efficiency, but again, I’d need to be convinced the public sector is inefficient. I’ve seen it suggested that the NHS, as a whole, is considerably more efficient at providing healthcare than the US system if medical staff are considered by ratio to administration staff as a measure.

People often fall into the trap of thinking that the only alternatives are the NHS or the US System. I would point to Swiss healthcare, which is widely recognised as amongst the best in the world.

According to the latest OECD figures it outperforms the NHS on every metric: More doctors, nurses and hospital beds per person, more CT Scanners, MRI Scanners and acute beds, longer life expectancy, lower infant mortality, better survival rates for cancer, stroke and cardiovascular disease. Waiting lists are almost unheard of and surveys show that the Swiss system has one of the highest patient satisfaction levels of any country in the world.
It does cost more per person than the NHS but the difference in productivity is far higher than the difference in cost. (i.e. It is much more efficient)
The Swiss System is the closest to market based that exists, the US system is not it is restricted by huge government bureaucracy and is a very poor system that we certainly should not aspire to.

It’s certainly true that the public sector is parasitic on the private sector for income, but the private sector is deeply parasitic on the public sector for services. I’m unconvinced that “parasitic” is an appropriate word to use to describe this relationship because it’s not as unequal as I think you’re suggesting.

The private sector uses the public sector for services because the public sector has a legal monopoly and there is no choice. (see my example of the window cleaning company above) I think parasitic is good because a parasite cannot survive without draining resources from its host.
The alternative would be symbiotic, where each party contributes to the well being of the other. Parasites take their resources by force, symbiotic relationships are entered into willingly. The state takes taxes by force, which makes the public sector parasitic in nature. (If you don’t understand that taxes are taken by force try not paying them and see how quickly the force is applied)

I enjoyed the assumption that I’m a public sector employee. I cannot figure out why that is relevant, but as it happens, I’ve never worked for the public sector in my life. I do receive NHS dental treatment and healthcare. My dustbins are emptied on time and the potholes in the road I park my car are mended. The park keepers do a great job with few resources to keep the park opposite green and tidy.

All these services are important and all cost money. The issue is not should they be provided, the issue is who can provide them most effectively and at the lowest cost. The public sector system disconnects payments from results. This is bad for those who pay and it is bad for those who are paid this way.  More detail on this here.

We feel that we all pay taxes, which are a given, and we all get free services so we should be grateful and not moan about their quality. In fact we all pay for the services with our taxes and have a right to demand value for money and high quality.

I’m not envious of people who earn more than me except in the sense that they can afford to give more away. I have more than I need, and enough to share. I figure that we receive is only a temporary gift until death.

Sounds very noble, but do your actions betray you?
Do you pass the coffee test.

I certainly didn’t ‘earn’ my way in life, but came to do what I do because of the way upon which I was parasitic upon my parents.

Really? You sit back and do nothing on your own. You make no choices about where to spend your time and energy?

Each of us earn’s our way in life. We inherent different potentials and abilities form our parents, we encounter different opportunities and problems in life. We cannot abdicate responsibility for what we do with those abilities and opportunities each day we live. Our life today is the sum of all the decisions we made in the past and our future will be determined by the decisions we make tomorrow and each day for the rest of our lives.

I am not saying that people don’t have bad luck or are born with disabilities which restrict their opportunities. What I am saying is that for each of us there are a range of possible lives and we are each accountable for which life we lead within the limits of our abilities and opportunities.

Words by Murray Rothbard

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  • The public sector is deadweight and no amount of cerebral chicanery will hide this fact of life. 

    • Try to imagine a world where everyone works in the public sector. Where would the money come from to pay everyone ? It is a parasite that lives off the production of the private sector.