Slí Eile: The controversy around public-private sector pay differences continues following today's release by the Central Statistics Office of a special multi-variate analysis of pay differences based on the 2007 National Employment Survey. The full Report can be downloaded here.
The conclusion is that public sector workers are better paid than private sector workers even when statistical controls are applied in relation to age, education, experience, gender etc. However, the difference does not seem nearly as large as that shown in the recent analysis by the ESRI. The CSO are careful to point out that even when statistical controls are applied certain differences remain which are hard to account for. In other words you could have two persons employed one in the public sector and one in the private with same level of education, union membership, experience etc and yet one is better paid than the other because the context is very different. This may have something to do with the way in which pay is set at central level or with the nature of jobs in each sector. It could also indicate a degree of labour market segmentation. Another feature of both studies - ESRI and CSO - is that non-regular bonuses of employees are not included in the underlying data. This can be an important feature of some private sector occupations including finance and banking (where evidently such bonuses have been sharply cut back in recent times). Previous blogs have addressed some of the issues. See here and here. There has been, already, adverse Union reaction to the latest findings.
While it is necessary to oppose proposals to cut pay in either the public or private sectors because of their deflationary impact and the unfairness of imposing cuts in pay on average to below average workers it is not helpful to dismiss robust statistical work - limited as it is by the available data. What should be countered is the way in which some commentators jump on these findings to support their argument for levelling down of wage income to lower levels. Silence prevails on other types of income. Getting back to competitiveness becomes a matter of getting back to normal profit levels (and super-normal in the case of many sheltered sectors and quasi oligopolies).
10 comments:
it is not helpful to dismiss robust statistical work
Especially when the dismissal is non-sensical and self-contradictory.
"The union said repeated comparisons of average pay in the two sectors completely ignored the actual jobs that people do"
Right, so raw averages are misleading, or?
"Every one of them has suffered a pay cut averaging 7.5%"
Oh yeah, except when an average supports your case, in which case they're so valid that apparently they apply to everyone.
The amount averaged 7.5%. The pay cut was universal.
What's your point?
The campaign to reduce pay in the public sector preceded this most recent data. It has been pitched as one of the central planks in reducing the deficit but it can't be disconnected from the fixed idea that it is 'necessary' to reduce wages in the public and private sectors. If reducing wages in the public sector did reduce the deficit it would only do by a very small amount and this 'positive' effect would probably be wiped out by negative deflationary one.
Surely that is understandable to even the average joe.
The point, Ernie, is there no such thing as good averages or bad averages, only average averages.
The pension levy impacts over a wide range from 0% for recalcitrant judges or clerical officers on job-share to the guts of 10% for medical consultants or secretaries general of departments.
Its just as correct to say that the average pension levy impact is 7.5%, as it is to state the average public sector salary is 47% (raw) or 19% (when corrected for qualifications, age etc.) higher than the average private sector salary.
Averages are what they are, neither good nor bad. Either you take them at face value, or you don't, but picking and choosing is a tad disingenuous.
On the issue of bonuses: the Kelly et al ESRI paper took account of that and it made no real difference. Maybe the picture is different in particular sectors (finance as you say) but this doesn't seem to change the basic story.
"While it is necessary to oppose proposals to cut pay in either the public or private sectors because of their deflationary impact and the unfairness of imposing cuts in pay on average to below average workers..."
There's an elision here - why not cut some public sector salaries and not others? No reason there shouldn't be drastic reduction in numbers on more than €80,000 to €100,000, is there?
@James Conran In regard to cutting salaries (I assume you mean this and not cutting numbers employed?) - the case for cuts in super salaries (I am talking about 150K p.a. upwards) is strong. This will not make much impact. If there were a cut in the 80-150K it would still have a relatively limited impact since few PS workers are at this level. The best and fairest way to address high incomes is through a third-bank income tax rates for over 100K earners in all sectors of the economy. Then your local doctor, accountant, dentist and solicitor (those still in business and at such levels of remuneration - I know many have slumped) are all sharing in the pain.
The bottom line is don't deflate, don't cut wages up to a certain threshold and don't cut welfare. Where will the money come from? There is loads of it. It is just not shared equitably ...We can also grow it be generating employment and income through wise, targetted investments in new areas ...
@Sli
How much head-room do you think there is above the current marginal rate of 54% payable by anyone over 75k?
@Proposition Joe Not a lot of head-room I admit. However, two points: it would be helpful if very wealthy persons did actually pay something like 50-60% at the margin instead of a much lower % given the range of hard-to-quantify tax reliefs.
I come back to the fairnes point. Why should a well paid public servant on say €100,000 take a pay cut of say 20% (advocated by some commentators and not a few economists) when a private sector worker on double that income takes no cut but increases income over the last year? There is the pensions issue - but the key to this is a social insurance arrangement for all members of the population well affordable if tax expenditures were redirected.
Sure, pension security and equity could be improved through a better social insurance system. But of course it would need to be funded and wage cuts for public servants on more than €80,000 is as good a way as any other (even if insufficient).
"The best and fairest way to address high incomes is through a third-bank income tax rates for over 100K earners in all sectors of the economy."
I have no objection to this, but I think there is further reason to reduce higher end public sector salaries over and beyond the normal redistributive channel of the tax system:
1) higher job security in public sector
2) pensions
3) private sector is more risky
4) crucially, we expect senior public servants to be partly motivated by and ethos of, well, public service. This is most obviously, but not exclusively, true of politicians, judges, civil servants.
@Sli
"There is the pensions issue - but the key to this is a social insurance arrangement for all members of the population well affordable if tax expenditures were redirected."
Is it? How would that work? Would pensions be fully funded from the earnings of concurrent workers, who would (as a group) draw down their own funds when retired? Would this public / group scheme be defined contribution rather than defined benefit? Because if not, and pensions are funded out of current taxes - or future generations insure our benefit levels with their taxes - then as the dependency ratio worsens the tax burden will increase proportionally. We might live well, but at our children's expense - the inverse of how most parents think!
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