Private sector will struggle to absorb axed public sector staff, warns IFS

Study by the Institute for Fiscal Studies raises concern over private sector's ability to absorb public sector job losses

By Colin Marrs

16 Jun 2015

Civil servants set to lose their jobs due to a promised increase in the pace of public sector cuts cannot be certain they will find employment in the private sector, according to research by the Institute for Fiscal Studies.

A report produced by the IFS with the Joseph Rowntree Foundation today said that the public workforce is set to fall by up to 800,000 by 2018-19, compared to a drop of 375,000 from 2010 to 2014.

As a result, the private sector will need to create more jobs to prevent former public workers spending a significant amount of time without a job, the report said.

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“It remains to be seen whether such large reductions can again be accommodated through moves into private sector employment rather than into non-employment,” the report said.

The research showed that under the coalition government, falls in headcount started sharply, before slowing after 2011, after which former public sector workers were almost fully absorbed by the private sector. 

Cuts to the public workforce under the coalition were smallest in the NHS and education, and largest in public administration, covering the civil service, local government and Job Centre Plus, according to the study.

However, the IFS said that despite cuts to public sector employment since 2010, the increase in redundancies in the public sector have stayed below the rate of the whole economy, reflecting the impact of pay restraint.

The Office for Budget Responsibility has projected public sector job cuts of 800,000 to 2018-19, before rising by 150,000 in 2019-20.

This would reduce the general government workforce as a share of all workers to around 15%, the lowest share since 1971 when records began.

The research also found that between 1998 and 2007, on average 2.6% of women in the private sector moved into the public sector, compared to just 0.9% of men, leading to a net inflow of women.

“The net inflow of women to the public sector could be partly explained by the fact that there appears to have been a public sector pay premium for women over this period,” according to the report.

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