The ESRI released a study today showing a gap between public and private pay. And IMPACT have released an objection to it.
But is there anything new in all this?
In many ways, the ESRI paper is academic. It is a twenty-one page report of a statistical comparison of 2003 and 2006 data, which means that it doesn't include recent changes, including further pay awards, but also pay cuts and the pension levy.
IMPACT argues that it doesn't compare 'real jobs'. Certainly, the statistical analysis doesn't seem to include trade union membership as a variable (although it does include 'membership of a professional body'). There is obviously a large different in the private sector between the 'good jobs' in large, unionised firms and the full range of private sector wages.
Are there any recent studies comparing unionised versus non-unionised levels of pay (cutting across the artificial public-private divide)? That would seem to be more pertinent. It also would refocus the question on the right to join a trade union and the right of workers to negotiate good wages. As mentioned before in relation to this issue, low wages lead to increased state expenditure, such as income supports, social housing, etc.
There probably needs to be more attention paid to the differences between managerial pay and other pay. Although there is less of a 'pay gap' at managerial level, because higher grades in the public service received higher awards in order to catch up with managerial pay in the private sector that had soared, that process failed to address the question of whether private sector managerial pay was reasonable in the first place. There probably is much more scope for re-examining managerial wages in the public sector than the broad wages of ordinary public servants - but that would involve a debate about what is a reasonable managerial wage.
The ESRI's figures, presumably from a press release, were trotted out on the radio yesterday. And the argument predictably turned to whether the public service is overpaid. But it is equally the case that workers in the private sector are underpaid, at least in some sectors. Again, it would be nice to see some international figures on this, based on purchasing power parity.
There is no doubt that the state's financial situation is dire, and some radical action will have to be taken in the immediate future. But Vincent Browne argued recently that the country's financial situation is nothing like as bad. There is still plenty of wealth in Ireland. So, it is a pity that the Government seems reluctant to grapple with the need for tax reform - and a large scale broadening of the tax base.
Further cuts in public wages will also surely depress the economy further. And then there are a lot of households who have taken out large mortgages on the basis of an ability to pay them back. Housing costs represent the stubborn bottom line in terms of the pay levels that people need to get by, and undermining people's ability to pay these loans will further weaken the banks.
All of this is to say that we are likely to see another round of arguments about public versus private pay in the media, but it is only part of the bigger picture.
5 comments:
In two previous blogs some of these issues have been teased out.
http://www.progressive-economy.ie/2009/06/mythbusters-101-wages-in-irish-public_05.html
http://www.progressive-economy.ie/2009/06/bloated-public-sector-wages-mybusters.html
@Nat
the statistical analysis doesn't seem to include trade union membership as a variable
Given the distribution of union membership across the public and private sectors, they might as well have controlled for being a public servant, essentially defeating the purpose of the study.
I can imagine the Blair Horans of this world latching onto that ... "look guys, if you control for being a public servant, the statistics show that there is in fact no public sector wage premium!"
Further cuts in public wages will also surely depress the economy further. And then there are a lot of households who have taken out large mortgages on the basis of an ability to pay them back.
And further tax rises and/or social welfare cuts (in lieu of public sector wage reductions) would have what effect precisely?
Why is taking an extra dollar out of someone's pocket in taxation somehow less deflationary than cutting someone else's wages?
I guess your answer to that question is surely that the tax rises will only impact on those who can "well afford it", the owners of "trophy houses" and the likes. In fact, the sheer weight of numbers will dictate that any serious broadening of the tax base will largely impact on the low-to-medium earners who currently pay very little income tax. Sure we can hit the ultra-high-earning shelterers too by closing tax exemptions, but that simply will not raise enough to plug the fiscal gap absent public wage cuts. And the slightly-above-average earners have taken the brunt so far of the tax changes, there being a limit as to how much more than 50% one can push their marginal tax rate.
The IMPACT statement that Nat links to above is also full of holes.
Nor does it include incomes for self-employed professionals, who are the obvious private sector ‘comparators’ for thousands of public service professional staff.
Oh yes, they're the natural comparators all right, what with their entreprenuerial zeal being matched only by the average public servant's aversity to risk. Not to mention the highly comparable levels of job security and pension provision.
Mr McLoone said he had told the Government that, if jobs, pay and pensions were protected, public servants would deliver the reforms necessary to protect public services from a recession
Yeah, if you just cut social welfare and raise taxes instead, we'll adopt the modern work practices that we were already paid for under Benchmarking I. Better late than never I guess!
@ Joe,
Given the distribution of union membership across the public and private sectors, they might as well have controlled for being a public servant, essentially defeating the purpose of the study.
Em, not really. "Union membership" and "being a public servant" are two quite different variables. There are going to be large differences between unionised and non-unionised private sector workers. And public sector jobs are much more comparable with unionised jobs if calculating pay differentials is going to make sense.
Re Tax
I agree with some of your points. I'm certainly not advocating welfare cuts. I'm not totally against cuts in public service wages either, but the Government's recent statements suggest that the Budget will focus largely on pay cuts, while not grappling with the unpopular idea of tax reform. Various wealth taxes, such as property tax, and the removal of tax exemptions, would certainly help plug some holes in the national finances. And the state needs to sort out its revenue generating system sooner rather than later, so it can be effective in rebuilding economy activity, which will of course also generate more tax revenue.
As for IMPACT's views, I'm not defending them, just illustrating the back-and-forth arguments.
what always happens in these situations seems to be that when the government wants public service reform, the unions always want to talk about pay.
When the government changes its tune and wants to talk about pay, suddenly the unions want to talk about public service reform.
It's a bit of a silly loop.
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