Friday 19 December 2014

Public sector employees are €8 an hour better off

Employers hit out at Government's 'premature' plans to reverse cuts

Published 17/08/2014 | 02:30

Brendan Howlin Minister for Expenditure and Public Reform. Photo: Frank McGrath
Brendan Howlin Minister for Expenditure and Public Reform. Photo: Frank McGrath
The revelation comes amid growing criticism of the Government's plan to reverse public sector pay cuts.

Public sector workers are, on average, €8 an hour better off than their private sector colleagues even after various pay cuts since the 2008 economic crash, new figures reveal.

The revelation comes amid growing criticism of the Government's plan to reverse public sector pay cuts.

An analysis of Central Statistics Office (CSO) figures since 2008 shows state employees earn on average €28.23 an hour while their private sector workers earn €20.21, a 39pc difference.

Last weekend, Public Expenditure Minister Brendan Howlin announced cuts to public servants' pay will be reversed.

Unions subsequently confirmed they will begin tabling formal pay increase demands.

However, an analysis of 
the impact on pay rates in 
both the public and private 
sectors from recession to recovery raises questions about 
the validity of the unions' demands.

Using quarterly CSO Earnings, Hours and Employment Costs Survey data, we tracked average hourly and weekly pay rates in the first quarter of every year since 2008.

The main findings include:

* Public sector workers have consistently remained better off per hour than their private sector colleagues, even after a host of cuts to their pay;

* Pay rates in the private sector have remained static, indicating many companies sacked people rather than reducing pay in order to cut costs during the recession;
l Before Haddington Road cuts in 2013, the gap public workers enjoyed over their private sector colleagues peaked at €9 per hour;

* The benefit of tenure and pensions in the public sector are also not factored into assessing the gap;

* 250,000 low-paid workers in the private sector are dragging down average pay rates;

* The average weekly wage across all sectors is now €689.88, with the weekly public sector wage standing at €899 and €628 in the private sector.

Employers' group IBEC said any talk of reversing 
the public sector cuts is "premature".

IBEC chief executive Danny McCoy said the focus must instead be on reducing "punitive" income tax rates, that all workers would benefit from.

He told the Sunday Independent: "The Haddington Road deal runs to 2016, so if we want to increase take- home pay, the immediate focus should be reducing tax. With the economy doing well, the resources are now available to reduce both income and consumer taxes."

To ensure our analysis was comparing like with like, we examined the pay rates in both the public and private sector in the first quarter of every year since 2008. We also examined the impact of inflation during this period, and tracked all government measures which have impacted on pay since 2008.

In that year, before the then Fianna Fail/Green government began any correction in the public finances, the average hourly rate in the public sector was €28.64, while it was €19.44 in the private sector.

In 2009, the first reduction to pay was a pension levy imposed on public sector workers, worth an average of 7.5pc. The second was a pay cut on a sliding scale, dependent on salary size, but worth an average of 6.5pc.

The impact of these measures caused a €40 drop in the average weekly earnings and a €1.30 drop in the hourly earnings of public servants in 2010. However, the continuation of the payments of increments, or length of service pay increases, which have cost the taxpayer €1.4bn since the crash, quickly offset some of the impact of those wage reductions.

By 2011, public sector pay rates were on the rise again and the average hourly rate rose from €28.68 to €28.90. The public sector hourly rates continued to surge as high as €29.04 by 2013, compared to €20.06 in the private sector at the same time, a gap of €8.98.

However, last year's Haddington Road deal saw another pay cut for higher paid public servants earning more than €65,000, pensioners on more than €32,500 and the suspension of increments.

The impact of those cuts caused a drop in the average hourly rate for public workers from €29.04 to €28.23. Despite the harsh cuts, today's figures show that the gap remains in excess of €8 an hour, as private sector workers are now earning €20.21 per hour on average.

Statisticians from state institutions such as the ERSI and the CSO and trade union think-tank, the Nevin Institute, warn that relying on average figures will give an overly simplistic picture, but all agree that the premium enjoyed by public sector workers exists. They also say the average hourly rate is a more accurate indicator than the weekly rate, which can be distorted.

Dr Eilish Kelly of the ESRI said the latest detailed analysis by the CSO, which related to 2010, showed the pay gap was as high as 18.9pc.

She conducted a further analysis based on that CSO data which concluded the gap was more like 17pc. She said most likely that gap has reduced somewhat given the Haddington Road cuts last year.

Speaking about Mr Howlin's plans to begin discussions aimed at restoring public sector pay levels, Dr Kelly said that any move on pay policy must be based on evidenced research.

The premium enjoyed by the public sector has been put down to the fact that public servants tend to be better educated and that there tends to be more managerial roles in state institutions.

However, a study published last October by economists at the European Commission found that of 26 EU countries, the unexplained pay gap was bigger in Ireland than in any other country.

Even when different education levels are accounted for, the pay gap is bigger in Ireland than anywhere else.

Sunday Independent

Promoted articles

Read More

Promoted articles

Editor's Choice

Also in Irish News