The seven things the PSPC report on public sector pay has taught us
(And why it might help get a deal that will prevent the country from going broke)
Do public sector workers deserve to have their pay fully restored to pre-crisis levels after suffering for years to save us from bankruptcy? Or are they a pampered, overpaid bunch of whingers who are set on driving the country back to financial oblivion?
That’s the gist of the highly emotive public debate that has been raging as we head into crucial pay talks between the Government and public sector unions.
A more measured view, encompassing both ends of the spectrum was provided this week by a much-anticipated report from the Public Service Pay Commission (PSPC). Here are seven things that the report told us: Public sector workers should pay extra for their pension – and some should pay more than others. Pre-2013 joiners have better pensions than their mainly younger counterparts – and this should be recognised when any hike in contributions is imposed. Pensions are also hugely more expensive the earlier you retire. So those with early retirement options should also pay more. These involve 23,000 people on so-called fast-accrual pension schemes – mainly the gardaí and the army. Military pensions alone, paid to some retirees under 40, cost the State €1bn in the five years to 2014. The PSPC has played down the issue of higher pay in the public sector (see panel) stating only that it offers more money at the start of a career and less later on. PSPC chairman Kevin Duffy is a former union boss and head of the Labour Court, a body not noted for being anti-union. When the guards threatened to pull out of the PSPC talks over Mr Duffy equating their strike with mutiny, other public sector unions expressed their support. Mr Duffy is clearly their favoured candidate for the job. But he is also fair, critical when necessary, and mindful of the broader economic picture. Pre-2013 public sector pensions are worth 12% to 18% more than private sector pensions. The Commission found that those
who joined post-2013 have pensions that are similar to private sector ‘defined contribution’ schemes. Mid to higher-paid public sector workers were really hammered during the financial crisis. The higher you go up the pay scale, the worse the financial pain, with €120k-ayear workers losing €21k. But some low-aid workers ended up better off after the Fempi (emergency financial measures that cut public sector pay) and Lansdowne Road pay deals. The public sector pay and pensions bill is almost the same now as it was in 2007. The pay bill went down by €1.7bn between 2007 and 2016 – but our pension bill rose €1.5bn, as thousands took early retirement. We’re not out of the woods yet. The State spends about €1bn more than it earns a year, and our gross debt is too high. The PSPC also pointed out that spending is not fully supported by the tax base.
CONCLUSION
The best way to win an argument is to see the other person’s point of view rather than engaging in a slanging match. In this regard, the prounion credentials of chairman Kevin Duffy established during his role as Labour Court chairman may make him an inspired choice to set the tone for the forthcoming pay talks.
Post-2013 public sector workers will also welcome the suggestion that their longer-serving and better-paid brethren should pay up more for their enviable pensions.
His commission has, in my view, conceded far too much on pay comparisons by bending over backwards to conclude that public and private sector pay is the same (see panel above).
But that was a lost cause anyway, as pay cuts in the public sector are seen as unthinkable unless the country has literally gone broke – and even then they’ll be fought against tooth and nail.
So conceding this point serves a purpose from the Government’s viewpoint in appearing to salve public sector union members who are smarting from widespread public criticism of their pay levels.
They may, as a result, be more inclined to accept the compelling economic arguments in favour of compromising on their demands.
In return, the Commission recommends the abolition of the hated pension levy, which should be replaced with a more equitable contribution that recognises the relative merits of pensions for pre- and post-2013 joiners.
By their end, realpolitik will prevail as usual. The unions will come out with less than they say they want – but more than many in the private sector think they deserve.
The final bill will be just about affordable. But it will be paid at the expense of arguably far more deserving causes, such as the health service, childcare and tax cuts for lowpaid workers.