Monday, 20 July 2009

Debate on public sector pay ...

SIPTU's Manus O'Riordan - writing in the Irish Independent last week - noted that: "In the three years to December 2008, the money values of average public sector earnings increased by 11.3pc, as against 10.9pc for manual workers in industry -- essentially the same rate of increase for each, and both in turn being completely offset by the 11.0pc increase in the Consumer Price Index over the same three-year period."

Predictably, Ed Walsh - writing in yesterday's Sunday Business Post - takes a different tack: "The once-useful social partnership process transformed itself into a damaging mechanism that has fostered a bloated public sector and pay scales that bear no relationship to those of our competitors".

PE's own Sli Eile has deconstructed public sector pay figures here and here.

Any comments?


Proposition Joe said...

Manus O'Riordan only addresses the *rate* of increase in recent years, not the inbuilt pay premium that already existed.

Basically the message to private sector workers is: "be glad that you only fell another 0.4% behind the public sector, but don't be questioning that existing 24% gap".

And before anyone comes back with the stock retort about the need for a "like-for-like" comparison, be aware that the ESRI produced this figure in a comparison that corrected for differences in age, qualifications and experience in the public sector:

Anonymous said...

Basically the message to private sector workers is: "be glad that you only fell another 0.4% behind the public sector, but don't be questioning that existing 24% gap".

Surely the message is instead that working in a non union environment guarantees employee exploitation?

It is unfortunate that the Irish private sector workforce have been so placid for so long but perhaps now we will see a reevaluation of who exactly the tiger economy was preying on.

Proposition Joe said...


The question is who is being exploited and by whom.

Public sector wage premia do not exist in a vacuum. They require either that all workers pay higher taxes to subsidize higher PS rates of pay and/or that resources that could have been used to improve the quality of public services instead be diverted to over-pay the public servants.

The fact the union membership is the mechanism by which public servants have accumulated these gains over the private sector is neither here nor there.

The same model of rigid demarcation, barriers to entry and monopolistic service provision could never be applied in the private sector, even if the workers there wanted to try. Mobility of capital & labour, and EU competition law would respectively undermine the main planks of PS union power if transplanted to the private sector.

Anonymous said...

Absolutely Joe and there are many who would argue that the recent direction of EU trade policy has largely been about large corporations being able to leverage wage disparities across national boundaries to push wages down across Europe, maximizing corporate profits at the expense of employee conditions and wages.

If you believe the EU is all about creating a more profitable operating environment for companies than this is fine. If you have other priorities than maximizing return on investment you might be interested in other arrangements more sympathetic to the needs of society than commerce.

A obvious solution to this would be pan European union cooperation but for the moment its probably enough to stop the additional deregulation measures being pushed through in the Lisbon treaty.

Anonymous said...

@Joe - but anon's point remains: in a unionized workplace employees do better. And, by extension, in a non-unionized environment they do worse. Ergo, the big lesson for workers is: join a union, any union, now!

Well, mobility of capital is ultimately discretionary. I know for neo-liberals it's the most profound value imaginable, indeed it's the essence of worth and morality. But for us mere, uninitiated, mortals capital mobility is a tool. If it helps bring about economic growth for all then it's worth retaining; but if, on the other hand, it undermines economic growth and social well being (like it's down) the worth of re-introducting capital controls and liquidating the supporting infrastructure of tax havens etc, is worth re-assessing.

Make no mistake capital mobility is not written in stone and it will come under pressure of the next few decades; EU treaties can be revised and amended to all re-introduction of such controls.....

progressive-economy@tasc said...

Conor McCabe has an interesting piece deconstructing public sector wages here:

Proposition Joe said...

"Ergo, the big lesson for workers is: join a union, any union, now!"

Well there's phrase common in the North East of England:

"shy bairns get nowt"

People often jump to the corollary that:

"all children should be vocal and greedy, for their own good"

The logical flaw is that the greedy vocal children only succeed in securing a larger slice of pie for themselves *because* they are in the minority. If all children adopted the same strategy we'd be back to square one, undoing the advantage of the grasping minority.

Its not an exact analogy, but I'm sure you get the point. The antics of the Irish unions could only be tolerated in the public service *because* they remained a small minority of the workforce. The economy could bare the cost of the large wage premium for those workers, as long as growth remained strong and that sector comprised only a small proportion of the *active* workforce. The collapse in the productive economy has led to both these conditions disappearing at once.

Union activism in the private sector might succeed in making localized and worthwhile gains, particularly for lower skill workers. But there is absolutely zero chance of replicating in the private sector the patchwork of restrictive practices and demarcation that underpin the gains of mid- and high-kill public sector workers. The relevant businesses would either go under or relocate elsewhere long before such tactics could bare fruit.

Anonymous said...

PJ, it seems harsh, perhaps even unfair, to reserve the majority of your ire for the "vocal greed" of the unions and label the entire public service as not being in "active" employment (though at least you did not say "productive") when it is the free market's quiet, generous activity that has destroyed this countries finances.

Not to suggest that the Irish public service is organized in an efficient way or that it does not need radical change, indeed reinvention. Just that confusing this issue with how the economy in general and private sector wages in particular have suffered by over reliance on market mechanisms and under regulation is a little disingenuous.

Proposition Joe said...


No harshness intended ... I was using "active" there to include both public and private sector workers in actual employment, as opposed to those forced to sit it out on the sidelines in unemployed inactivity.

The point was the rake of recent job losses have caused the proportion of the workforce engaged in the public sector to rise significantly (even though the growth in absolute public sector numbers has plateau'd).

Anonymous said...

My mistake PJ, I obviously did not read the text of your post closely enough.

In my defense since you had compared union activity to improve the lot of their members to the "vocal", "greedy" and "grasping" antics of children you might understand how I could mistake a technical term for invective.

Slí Eile said...

Talking of public sector pay, one Eoghan Harris launched a salvo in this on-going 'class war' against the public sector:
"When I was a socialist, I would look around and ask who were the fat cats. If I were an active socialist today and looked around, I would realise the only fat-cat class, permanent and pensionable, is the public sector."
Seanad debate at:
'If I were ...'

Arise ye poor of the private sector against those fat capitalists in the public sector you have nothing to lose but your low pay and job insecurity !!
(how come when discussing public-private differentials there is no mention whatsoever about non-wage income in the 'private sector'?)

Wyseman said...

Well, Sli Eile, why is it that none of the bloggers on this site mention the recent CSO report which found that the average hourly earnings in the public service are almost 50% greater than those in private sector? Funny that.

Conor McCabe said...

They have. Now that's TWO things you haven't read, wyseman - the NES 2007 and articles on this blog.

Slí Eile said...

It wasn't 50%. See earlier blogs Mythbuster 101 which discusses ESRI papers plus earlier work by O'Leary. The key issues are teased out there.

Tomaltach said...

One thing is regrettable. It is that every time there is a discussion about the conditions and contributions of the public and private sectors, the arguments get buried under a heap of ideological rubble. Those who think the market works efficiently always and everywhere just loathe the notion that perhaps the public sector delivers something that the market cannot provide in a way that society wants it delivered. But equally those who cannot imagine the word 'market' without it being followed by 'failure' will not tolerate neither the necessity of the market nor the scale of problems in the public sector. But anyway, that's life.

But Slí, to draw Eoghan Harris into the melee is surely to attack a straw man. We all know the kind of factless, provocative, diatribe with which the reactonary Harris has become synonymous.

Slí, who can doubt that small sections within the private sector have enjoyed hideous levels of support in terms of the tax system and other structural biases in our economy. But in the main, for the vast bulk of the one and a half million or so private sector workers, what are the significant non-wage incomes you have in mind?

Proposition Joe said...

@Slí Eile

"how come when discussing public-private differentials there is no mention whatsoever about non-wage income in the 'private sector'"

A large chunk of non-wage income over the boom period was based on rents from buy-to-let properties.

It would be interesting to see the distribution of ownership of buy-to-lets across the public and private sectors.

You're probably assuming that it would be overwhelmingly skewed to the latter, but I'm not so sure given the anecdotal "evidence" one hears about the multi-property-owning Garda or teacher.

I know of no concrete stats on the matter, I hasten to add.

Conor McCabe said...

"A large chunk of non-wage income over the boom period was based on rents from buy-to-let properties.... I know of no concrete stats on the matter, I hasten to add."

Well, indeed.

Proposition Joe said...


I meant that I know of no concrete stats on the distribution of rental income across the public and private sector.

The fact that rents do constitute a "large chunk" of non-wage income is however supported by statistics such as the cost of tax relief on this rental income set against the repayment of interest on buy-to-let mortgages. This relief has been costed at 800 million, which would give the declared rental income in the ballpark of 2 billion, with undeclared rental income pushing this up by some unknown (always greater than zero, if the history of Irish tax evasion is anything to go by). Of course there's also the unmortgaged rental stock to consider, and the proportion of income not eligible for relief by virtue of the rent received exceeding the mortgage interest paid.

Note also that the cost of social welfare rent allowance alone is in the ballpark of half a billion. Extrapolating from that to include rents paid by workers above the threshold would also suggest that we're talking about a very large number here.

So by any measure, rents are indeed a large chunk of non-wage income.

Anonymous said...

perhaps the most despicable side of the mess this country is in is the willinness of this government to divide the people instead of uniting them leadership is not found in economists reports or commissions on taxation it is in the hearts and minds of those who wield power. the irish people have endured many things in the past eighty years but they fought and struggled from emigration and poverty to achieve success. this success was claimed for years by the elite of this country to the point where they forgot what got us there. When people believe and respect those in charge they will do whatever it takes when the govt realises this then this country has a chance, all the reports and analyis and subterfuge will be to no avail. they have thrown the public service to the wolves and protected what they see as the real ireland. the lack of vision the lack of originality of thinking is breathtaking. as a private sector worker < another tag designed to divide> married to a nurse i can assure you that the reality of life for us is very different to the majority of people who post to this site.