Underwhelming pay report proves we’ve learned nothing from mistakes of Celtic Tiger
IS THAT it? The long-awaited Public Sector Pay Commission report was finally published yesterday and to say it is underwhelming is putting it mildly. Does it tell us anything we didn’t already know? Hardly. Perhaps we shouldn’t be too surprised. There was a clue in the make-up of the commission. All fine, talented and upstanding people, it should be stressed. But with one economist out of seven members – compared to two former trade unionists and the rest with a human resources, industrial relations or a consulting background – the report was never going to be revolutionary.
However, even allowing for that, the absence of any proper benchmarking of public-sector pay here with remuneration of public servants elsewhere in Europe is hugely disappointing.
Those international comparisons that are there – based, it seems, on existing Eurostat data – do confirm that Irish public servants are among the best paid in the EU.
But the lack of detailed comparisons is deeply frustrating. It would have been hugely illuminating if, for example, we’d been presented with a series of tables that showed the average pay and pension of gardaí, teachers, nurses, and various grades of civil servants in comparison with their counterparts in three or four other EU countries.
That isn’t in the report. And for all the explanations that are routinely given for the absence of such international benchmarking – ‘difficult to do’, ‘doesn’t take account of differing costs of living’, ‘methodological differences’ – it’s hard to understand why it can’t be in there.
Without that data, we’re surely missing the big picture. We’re routinely told that, for example, nurses are not being paid enough here and as a result we’re losing graduates to other countries. That may well be the case. But surely we should see the data that backs that up in a public sector pay commission report?
It’s desirable that certain key groups, where recruitment is a genuine issue (such as in nursing), are given special treatment, but the research has to be there to back that up before additional resources are allocated. So far, at least, we haven’t been given that information.
The report’s findings that average public-service earnings are now approaching parity with the private sector will of course be seized on by the public-sector unions. They’re doing their job in doing so.
But the methodology that brings a gap of 40pc – that is the indisputable difference between average public-sector and privatesector pay in the CSO figures – down to parity, when account is taken of differences in educational qualifications, experience and age, will raise eyebrows. It will be interesting to hear what the European Commission and the IMF make of it.
A recent report from Davy Stockbrokers found, compared to our 40pc gap, the difference between public and private-sector workers in the UK is zero. The average UK public-sector salary is €30,000, compared to €47,000 in Ireland. That Davy report concluded that Ireland’s public/ private pay gap is on a par with the likes of Italy, Greece, Portugal and Spain, which probably tells us more than all the pages of appendices in yesterday’s Public Sector Pay Commission report.
The report is strongest in its assessment of public-sector pensions and its finding that they are worth 12-18pc more than pensions in the private sector and that there should be “increased employee contribution” to take account of that. But even that again understates the true value of public-sector pensions.
All workers in the public sector automatically get a pension. In contrast, the level of cover in the private sector is just 40pc – the majority of workers receive no pension contribution from their employer. So for most private-sector workers, the premium for a public-sector pension is considerably more than the reported figure of up to 18pc.
There is also a clear fudge on the issue of security of tenure – a real issue given so many private-sector workers lost their jobs after the economic crash. The commission says the guaranteed job of a public-sector worker does have a value but says no scientific evidence has been identified that could reasonably be used for assigning it. Actuaries working for the likes of insurance companies generally have little difficulty in assessing risk based on a person’s career choice, so it’s puzzling that it should be so elusive in this case.
Then again, why go kicking sleeping dogs? A number of months ago, I wrote a column on these pages lamenting the fact that the decision had been made to award a whopping pay increase to gardaí before the Public Sector Pay Commission had a chance to report.
But the reality is the publication of this report wouldn’t have changed anything. The Government, faced with the prospect of a hugely contentious and unprecedented strike by gardaí, caved in. Political expediency dictated what happened and will do now as well.
With talks set to begin for a successor to the Lansdowne Road Agreement, the ground rules are now set. The value of the publicsector pension will be on the negotiating table – as sought by Public Expenditure Minister Paschal Donohoe – although it’s impossible to see workers being asked to pay more than the existing pension levy. It’s far more likely that some form of permanent pension contribution will be proposed as a like-for-like replacement for the levy, brought in at the height of the financial crisis.
That leaves pay to be sorted and, on the basis of this report, sorted it inevitably will be (even if selling any deal to members will be a challenge). Can the Government keep the pay increases to a prudent level? It’s a huge test for Mr Donohoe and the Coalition, particularly with so much uncertainty over the impact of Brexit. Memories of the bonkers public-sector pay deal reached just weeks before the economy fell off a cliff in 2008 still linger.
The big fear is that, with hindsight, any deal agreed this summer will be similarly judged in the event of a hard and painful Brexit. The truth is that, back in November, the Government opted for peace at any price with gardaí. It was no different from the kind of deals that became routine under Bertie Ahern’s tenure when money was no object. A similar agreement with the rest of the public service would confirm that we’ve truly learned nothing from the mistakes of the Celtic Tiger.
The early signs are not good.
The Government, faced with an unprecedented strike, caved in. Political expediency dictated what happened and will do now as well