8. Public and private sector employment

Employment can also be categorised as private or public sector employment. Figures 5a and 5b show the private and public sector employment levels over the period 1855 to 2018 respectively. The figures show that workers have predominantly been employed in the private sector.

In 1855, private sector employment amounted to 10.9 million workers. In that year, private sector employment constituted 96% of all employment. By 2018, it reached its highest level of 27 million, making up 83.5% of all employment. Between 1983 and 2018, the private sector experienced significant growth, increasing by 57.4%.

Figure 5a: Private sector employment, UK, 1855 to 2018 Source: Bank of England - A Millennium of Macroeconomic Data Download this chart Figure 5a: Private sector employment, UK, 1855 to 2018 Image .csv .xls

Figure 5b: Public sector employment, UK, 1855 to 2018 Source: Bank of England - A Millennium of Macroeconomic Data Download this chart Figure 5b: Public sector employment, UK, 1855 to 2018 Image .csv .xls

Both private and public sector employment show upward trends. Public sector employment growth was due to the general expansion of central and local government. For example, there was significant employment growth during the world wars, and later in line with the evolution of the welfare state.

Comparing private and public sector employment trends indicates that, in general, the two tended to move in opposite directions. In some cases, this was the direct result of changes in policy. For example, public sector employment increased significantly after World War 2, partly because of the nationalisation of some entities in the economy, including railways, coal mining, public utilities and heavy industry, and this was mirrored by a substantial decline in private sector employment. By 1979, public sector employment had reached its highest level of 7.07 million, representing 28.1% of total employment.

In the 1980s, policy moved in the opposite direction with the privatisation of some industries. This coincided with a reduction of public sector employment to levels comparable with the 1950s. The following two decades saw public sector employment decline significantly, reaching 4.99 million by 1998. The share of public sector employment also reduced to 18.6% of total employment.

Although public sector employment increased during the 2000s until the economic downturn of 2008 to 2009, it decreased again in the period after the downturn, when austerity measures were put into effect to tackle the budget deficit. As of 2018, 5.36 million people were employed by the public sector, representing 16.5% of total employment. Similar figures were observed shortly after World War 2.

We can disaggregate public sector employment to illustrate its changing structure over time. Figure 6 shows the contribution of those employed in central government, local government and public corporations to public sector employment between 1949 and 2018.

Figure 6: Contributions to public sector employment, UK, 1949 to 2018 Source: Bank of England - A Millennium of Macroeconomic Data Download this chart Figure 6: Contributions to public sector employment, UK, 1949 to 2018 Image .csv .xls

Figure 6 shows that, since 1949, the composition of public sector employment has changed significantly. Public corporations’ contribution to public sector employment decreased, while the contribution of central government increased. The contribution of local government increased until 2000. Since then, it has been on a downward trend.

Between 1979 and 1998, the contribution of public corporations to public sector employment decreased from 27.7% to 7.1%. This indicates that the fall in public sector employment from the 1980s onwards was driven largely by reductions in employment by public corporations.