When I got my first suit-job in London in the mid-80s, I was impressed that my pay packet included London weighting and Luncheon Vouchers. This was the big league. The LVs were worth £2 a day, which was enough for boiled beef and carrots, plus plum duff and custard, in a caff down Marylebone Lane. I eventually twigged that you could also use them at Safeway (as ASDA then was) for a big shop, though this made you unpopular with the rest of the checkout queue because they each had to be endorsed by hand.
These were also the days when every office desk had a glass ashtray, and there were special smoking carriages on the Tube - a bit like a nicotine sauna, inhabited by fully clothed grey-faced wraiths. I mastered the commuter's art of platform positioning at interchanges (Notting Hill, in my case) just to avoid having a smoking carriage open up in front of me when a platform crush meant you had to board the nearest. Just as smoking gradually disappeared from the workplace and transport, so the LV was eventually phased out as the associated tax break evaporated.
The weighting was because the oil company I'd joined had an office in Aberdeen as well. The irony was that the Granite City was in the midst of a boom, which meant local prices had risen to more than most London boroughs, but they did not enjoy the capital's bonus. I was reminded of this by the news that the government wants to introduce regional pay levels for civil servants. This does not mean increasing London-based salaries, but freezing and gradually reducing the salaries of civil servants elsewhere.
A key justification for this is to provide a boost to the private sector in the North and West, on the grounds that employers in these areas cannot afford to recruit staff owing to the relatively high public sector wages. In other words, the private sector is being "crowded out" by the public sector in the hiring market.
The ongoing public sector cuts mean that many of these highly-prized employees are being made redundant. In other words, the "crowding out" theory assumes a high number of private sector vacancies at the same time that suitable workers with the right skills are becoming available. This should result in equilibrium, candidates filling vacancies, assuming enough workers are prepared to take a pay cut.
Reducing the pay of the remaining civil servants is unlikely to make many of them consider jumping ship to the private sector, at least not in the short term, as they will know that any vacancies will now be attracting their former colleagues.
If the private sector cannot attract employees with their current pay levels, given the already high rate of unemployment in the regions and the relatively common skill level of most public sector jobs (i.e. we're not talking about rare professional or high-tech skills, but mainly transferable clerical and admin skills), then that would imply that the offered rates are lower than the existing market will bear.
In other words, crowding out does not make sense. Either the private sector is failing to offer adequate wages, in which case employers should listen to the market and up their offer, or there is a sufficiently high level of employment among clerical workers that the latter can be choosy, avoiding the private sector in favour of the public sector, despite the latter not currently hiring.
Even members of the coalition government are being cautious, with Vince Cable wondering how this would impact on career progression at a national level - i.e. why would anyone based in London accept a sideways move (or even a promotion) to Newcastle if that meant a pay cut? The recent strategic intent of moving more civil servants from London to the regions will probably run out of steam, if it hasn't already.
Cable, as a Lib Dem, has tried to square this by playing the localism card: flexible pay means "more genuine decision making at a local level". I'm not sure why he felt the need to add the adjective "genuine". According to the Guardian, the Treasury "is not trying to introduce just regional pay, but local or zonal pay that might take account of, for instance, living costs in suburban Manchester as opposed to inner-city Manchester". If these words accurately capture the spirit, then what is significant is the focus on "living" rather than "working" - i.e. the employee's pay level may be geared to where they live as much as where they work.
On the face of it, this is absurd. But pay in line with expectations is what happens if geographical weighting is applied at such a granular level. People will tend to live near where they work, partly because it reduces the cost of transport and partly because they're more likely to seek a job nearby in the first place. If a government office in affluent Cheadle has a higher weighting than one in less affluent Ancoats, this means Cheadle residents will be paid more for doing the same job as residents of Ancoats. The good people of Cheadle will expect this, and they will come to see it as entirely appropriate. Talk about a postcode lottery.