Public sector nurses accumulate a financial advantage of roughly £100,000 over their working lives compared with their counterparts in the private sector. The extra payments are in areas such as pensions and other benefits that are designed to compensate public sector workers for the tougher conditions they face in the NHS.

These are the main findings of research by Alexander Danzer and Peter Dolton, presented at the Royal Economic Society’s 2013 annual conference. Their study looks at the ‘total reward’ that nurses receive over their working lives. This includes not only earnings but also future pension income and other benefits as well as such conditions of work as shorter hours, longer paid holidays and the lower risk of unemployment – all estimated over an entire working life.

The researchers show that public sector nurses build up higher total rewards through comparatively generous earnings and pensions. This gap widens over the course of nurses’ working lives.

The authors argue that the reason why not all private sector nurses want to work in the public sector can be found in substantially poorer working conditions and higher stress levels as well as lower control over working pace and less autonomy in the public sector. The authors suggest that higher monetary reward is needed to compensate for poorer working conditions so that both sectors attract nurses.

They conclude:

‘A government that plans to change the relative remuneration between the public and private sector must look within occupations to understand whether these differences have substantive reasons.

‘The case of nurses clearly shows that cutting public sector pay while keeping the working conditions constant may directly lead to a shortage of nursing staff.’


The study’s measure of ‘total reward’ includes earnings, future pension income and other benefits and conditions of work, such as shorter hours, longer paid holidays and the lower risk of unemployment – all estimated over an entire working life. The valuation of ‘total reward’ for nurses is the first application of this powerful tool for assessing differences between the public and private sectors for several occupations.

The authors suggest that any meaningful analysis of ‘total reward’ must involve evaluating all elements of remuneration, including a careful assessment of the value of pensions and all other elements of compensation. Such a calculation is now much more important following public debate about Lord Hutton’s report on public sector pensions.

Appraising the value of pensions in isolation from other elements of remuneration is misguided. What is required is a comprehensive assessment of ‘total reward’ differences between public and private sector employees that captures all elements of remuneration.


Notes for editors:

‘Lifecycle Dynamic Compensating Differentials and Total Reward: The Case of Nurses in the UK’ by Alexander Danzer and Peter Dolton


Alexander Danzer:
Peter Dolton:

RES media consultant Romesh Vaitilingam:
+44 (0) 7768 661095

Page Options