The Challenge
How to reduce the longstanding high levels of inactivity and unemployment in Wales. Should public sector pay in the UK reflect more closely private sector pay in local labour markets?
We are improving understanding of public sector pay
The method
The strong research base in labour and regional economics at Swansea with publications in world leading journals using large micro data sets and econometric techniques with a strong policy focus has been recognised internationally. Since 2002, this has resulted in the development of three research centres: WELMERC in 2002; SERC in 2008; and WISERD in 2009 and 2014 (SERC and WISERD both ESRC Research Centres). These research centres have brought over £2.4m in funding to Swansea and produced over 50 reports impacting directly on policy.
The Impact
Since labour market policy recommendations were made to the Welsh Government, dramatic improvements have been seen in the area. For example, the inactivity rate in Wales in 2019 was below the UK average, whilst in 2001 it was nearly five percentage points above.
The Chancellor of the Exchequer asked pay review bodies in 2011 to examine the case for making the pay of around six million public sector workers more reflective of local labour market conditions, following research by the the Institute for Fiscal Studies (IFS) which suggested large public/private sector regional wage differentials.
Research by Professor David Blackaby, Professor Phil Murphy and Professor Nigel O’Leary challenged the method and findings of this research and found much smaller or insignificant regional wage differentials.
The Chief Economist at the Office of Manpower Economics stated the research from Swansea played a valuable role in helping pay review bodies assess the evidence on this issue. In 2012 the Chancellor abandoned this policy which would have reduced the pay of millions of public sector works in less prosperous areas.
This research also influences the way the Office of National Statistics produces estimates of the public/private sector wage gap since 2013.
Research has also informed Welsh Government policy in the area of education where an additional £1m was made available for training in its flagship foundation phase programme and a further 29 recommendations accepted following research reports by WISERD.
