Tuesday, 9 November 2010

Public sector workers - some awkward facts

Peter Connell: Never let the facts get in the way of a good story. Surely a good epithet for much of what masquerades as analysis of our current crisis. And there’s no more eloquent commentator than Senator Eoghan Harris. Harris is passionate about ideas. From intellectual powerhouse of the Workers' Party to speech writer for David Trimble and public advocate for Bertie Ahern, ideas are his stock in trade.

And his latest big idea is to see high public sector wages as the obstacle to resolving our current economic crisis. Public sector pay and pensions is ‘the fattest of fat cats’. His solution, as outlined in last Sunday’s piece, is to bring public sector wages and penions back to their 2003 level. Harris dismisses Fintan O’Toole’s recently publish book Enough is Enough on the grounds that in offering solutions to the crisis the author fails to address the ‘scandal’ of high public sector pay. What we need, according to Harris are facts, or ‘awkward facts’ as he calls them. But all he offers are pronouncements and second hand, second rate analysis. Such as ‘Irish teachers are the best paid in Europe’. Of course this simply isn’t true. Harris doesn’t quote the source of his statement, he doesn’t do primary research. The awkward facts are available from the OECD (2008 data). Since 2008 teachers have had a 2.5% pay increase in October 2008 followed by pay cuts of, on average, 12-15%% (pension levy in March 2009 and pay cut in January 2010). So, if we examine the data published by the OECD, and assuming a modest 3% increase for teachers in other countries since 2008, we find that the starting salary for a primary school teacher in Ireland is below that of Luxemburg, Germany, Switzerland, Denmark, Netherlands, Spain, Norway, Scotland, England and Finland. At the top of a long incremental scale Irish national school teachers are well paid but less well paid than those in Luxemburg, Germany, Switzerland, Austria and Portugal. Exactly the same pattern is true of second level teachers. When I last checked my atlas all of these were European countries.

Harris’s ‘research’ also claims that Irish secondary school teachers ‘take the most holidays [in Europe]’. Again, let’s consult the OECD for some awkward facts regarding actual teaching hours. According to Chart D4 in Education at a Glance 2010, at lower secondary level Irish teachers spend 720 hours in class each year, above the OECD average of 703 and above that of 17 other European countries. His snide remarks about teacher’s holidays simply expose his bias.

When it comes to public sector pay Senator Harris is equally sloppy in his research. The public sector pay bill has increased significantly since 2003 but that’s more a reflection of increased public sector numbers than any pay bonanza for your average public sector worker. Let’s look at some more awkward facts. Our starting point is June 2003 when the first phase of the infamous benchmarking award was paid. Let’s say our employee is awarded a 10% increase under benchmarking. Between June 2003 and October 2008 (s)he enjoyed ten pay increases, three arising from benchmarking, three from the Sustaining Progress agreement and three from Towards 2016. The total percentage increase up to that point was 27%, when inflation over the same period was just over 20%. So, a 7% increase in real gross income. Not bad, but not a bonanza. Since October 2008 pay cuts amounting to about 13% have been imposed. Add in deflation of -5.5% and we find that the average public sector worker in 2010 has a gross salary 14% higher than in 2003 while inflation over the same period was 15%. So, in terms of gross income public sector workers are right back to where they were in 2003. Add in recently imposed income and health levies and Harris’s notion of the average public sector worker being a ‘fat cat’ is simply indefensible. He rightly feels empathy with private sector workers who have lost their jobs. He singularly fails to relate to the experience of low and middle income public sector workers who, like their private sector colleagues, are seeing their living standards assailed on all sides.

Harris claims that ‘the Government could find the €6bn it needs by simply cutting back public pay and pensions to 2003 levels’. The public sector pay and pensions bill is about €21.8 billion. To save a net €6 billion the gross bill would have to be cut by at least €8.5 billion or by almost 40%. The reason is that public servants pay PAYE, health levies, income levies, PRSI and make pension contributions to the State. Cut their pay and you cut all these sources of income to the State. Cuts don’t translate into savings. It’s a mistake repeated by most commentators. It’s simple maths. Senator Harris should try it some time.


Rory O'Farrell said...

I'd be more worried if Eoghan Harris supported public sector workers.

I've never forgiven him for backing Waterford against Kilkenny in 2008. Look what that led to.

Nat O`Connor said...

"between June 2003 and October 2008 (s)he enjoyed ten pay increases, three arising from benchmarking, three from the Sustaining Progress agreement and three from Towards 2016."

Possible typo here. Where's the tenth one?

"public servants pay PAYE, health levies, income levies, PRSI and make pension contributions to the State."

Plus those cuts would lower aggregate demand in the economy, and lessen tax revenue from VAT, Excise, etc. The loss of demand alone would undermine thousands of private sector jobs.

Having said all of that, if we are looking at high pay, it is interesting that the Conservative-led government in the UK has set a maximum on public sector pay (at no more than 20 times the lowest paid public servant). There is certainly scope to look at the highest levels of public pay, as they had both higher percentage growth and higher growth in real terms during the various benchmarking exercises, etc. It is likely that the ratio of lowest:highest pay in the public service has grown a lot over the last decade or so.

This higher ratio mimics a similarly unequal pay distribution in the private sector. But should the public sector ape the private in terms of high pay? If it does (in order to attract the best talent, as has been claimed), the Government has other options apart from reducing high public pay, such as more tax on high earners overall.

Peter Connell said...

Well spotted...four increases under Towards 2016 totalling 10%. I agree entirely with your comments on high pay. Harris, though, doesn't distinguish between the relatively small numbers on high pay in the public sector and the vast majority.

Anonymous said...


What about Harris's claim that "the CSO and the ESRI put the gap [between public and private sector pay] at about 20 per cent, after variations in age and qualifications are taken into account"? Is that true?

Anonymous said...

sorry Peter, I just realised the error in my previous comment - basically, it was premised on the assumption that Eoghan Harris could actually be right about something, and we know that that is a logical impossibility.


Peter Connell said...


Harris has adopted so many different positions over the years that I imagine he has to be right on occasion.

Yes, it is true that the ESRI report contains that assertion. Whether their methodology is robust has been disputed. The second benchmarking report issued in 2007, which was based on a very comprehensive comparison of 'like for like' grades and employments, found no such gap. In any case their findings were based on 2006 data. Since then public sector employees have had significant pay cuts imposed. Whatever gap existed in 2006 is certainly different now and this is partly reflected in published CSO data. Of course private sector workers have suffered high levels of unemployment and their plight has been virtually ignored by a government whose latest policy appears to be founded on a hope that the unemployed will do us all a favour and go live somewhere else. Harris promotes a view that sets public sector against private sector. It is not one to which I subscribe.

Anonymous said...

Within the public sector are different bodies with different issues. For example many people employed in health and education were in temporary posts for years. The opportunity to compete for permanent posts was a relatively recent phenomena. Therefore many of those people don't have proper pension provision at all. Gold standard pension is a myth that needs to be exploded. It only exists for a few at the top of the pile. The bigger the lie..type thing!

Whassup said...


According to Finfacts:
the combined cost of Public Sector Pay and Pensions in 2010 is €15.09 billion; This is quoted as being a net figure.

Considering that pension related payments made by Public Servants in 2010 are estimated to be approximately €1.8 billion, which substantially funds (possibly 70%) the pay-as-you-go Public Sector Pensions (PSPs), it is important not to double count the payment of pensions when the Exchequer is only required to pay approximately €400-€500 million towards PSPs this year.

Any light you could shed on overall anomalies in these figures would be appreciated.


Mack said...

Peter, those OECD figures don't seem to take account of the various bonuses / additions available in Ireland.

From http://www.tui.ie/Salary_Scales/Default.286.html

wef 1/1/10

1. (a) (i) H. Dip in Ed. (Pass) €591
(ii) Higher Froebel Cert. €591
(b) (i) H. Dip in Ed. (1st or 2nd Hons) €1,236
(ii) Árd Teastas Gaeilge €1,236
(c) Primary Degree (Pass) €1,842
(d) Masters Degree by thesis
or exam (Pass) €4,918
(e) Primary Degree (1st or 2nd Hons) €4,918
(f) Masters Degree (1st or 2nd Hons) €5,496
(g) Doctors Degree €6,140

Only one of the allowances at (a) or (b) may be held together with one of the allowances (c) to (g)

2. (i) *An Teastas i dTeagasc na Gaeilge le honoracha
(ii) *Higher Diploma in Education (1st or 2nd Hons)
(iii) *Primary Degree (Pass) together with at least 3 years approved experience in commercial, industrial or other approved occupation.
*Payable only to teachers who were in receipt of an allowance of £110 (pre July 1968) and who did not qualify for a higher allowance at 1. above.
(iv) Diploma for Teachers of Deaf Diploma for Teachers of Blind
Diploma for Teachers of Mentally and Physically Handicapped Children

1. Rural Science Teachers (for organisation and development of education activities outside formal class instruction)
2. Itinerant Domestic Science Teachers
3. Teaching through Irish
4. Gaeltacht Grant payable to teachers in the Gaeltacht other than those in receipt of an allowance equal to 10% of scale salary
€ 3,063
5. Island Allowance
6. Special allowance payable to teachers in Comprehensive Schools
7. Allowance for Teachers with 35 years service
8. Secretary Board of Management Allowance
Prison Service Honorarium €4,773

Peter Connell said...


You're absolutely right. Except they don't take account of bonuses/allowances available in any country, not just Ireland.

Teachers in most countries are paid allowances of various kinds. Teachers in London, for example, can benefit from the inner and outer London allowance which can range from £2000 to £6500.In some countries teachers are paid for working above their contracted hours.
Relatively speaking Irish teachers with permanent posts are well paid. But their pay is not out of line with those in other EU15 countries when all factors are taken into account, including allowances, teaching hours and class sizes. And it is worth noting that the majority of our young teachers do not have permanent positions and are certainly not the 'fat cats' castigated by Eoghan Harris. 53% of primary school teachers under the age of 30 are employed on contracts of 1 year or less. This compares to 10% in Norway and 4% in Denmark.

Mack said...


That's true, but the fact that the bonuses are particularly generous in Ireland almost completely invalidates the comparison. You article would have been more intellectual honest if you'd stated that up front rather than the political polemic that it essentially is (there's nothing wrong with political polemics of course) it's just that I presume that you were aiming for something with a higher level of credibility. Harris' article is just another polemic I guess.

The additions in Ireland would easily take the permanent starting salary to €37-38k (with long holidays & short hours & gold plated pensions) regardless of where the teacher lived (Lifford in Co. Donegal hardly has costs consumerate with London) - these are well above private sector norms. I appreciate that many teachers take some time to find a permanent job (especially in the current environment). There's probably an element of chicken and egg in place too. The salary scale starts at too high a level, which means it takes some time for a teacher to work up the experience to be worth their permanent cost.

I have close relatives teachers, both in Ireland and the UK. Salaries are higher in Ireland (with better holidays) and they are much higher here than in many continental European countries - one relative turned down the opportunity of an interview in Belgium because the salary was far below that in Ireland (and unfortunately she still doesn't have even a temporary position) - but oddly enough was around about what the average graduate earns.

I think it's probably worth mentioning that most of the (would-be) teachers I know south of the border are unemployed. I'm not going to offer any solutions, I don't have any, Ireland is bankrupt. I doubt very much if salaries were cut additional teachers will be hired. Polemicise away I guess..

Peter Connell said...


My original post was prompted by Eoghan Harris's use of data and his 'bold' generalisations in the context of his 'private sector good', 'public sector bad' agenda. I used the teachers' salaries and working hours issue as a 'for instance'. I'm not a teacher and don't claim to represent their interests.

His claim that Ireland's teachers are the best paid in Europe and have the longest holidays (and by implication the least hours in the classroom) is untrue but he is provided with a prominent platform from which to espouse his views. There are lots of dimensions to the OECD data. If all factors are taken into account such as salary, allowances, classroom hours, class size, teacher's salaries in relation to GDP per capita, spending power of teachers' salaries the picture that emerges is not one that would support Eoghan Harris's contentions.

The solution to our problems does not lie in vilifying public sector workers. Nor does it lie in attacking private sector employers or small businesses. If we're going to be polemical at least let's pick the right targets.