Saturday 21 January 2017

It's déjà vu all over again as pay rises set to blunt the chance of a competitive edge

Published 14/05/2015 | 02:30

Pensions are perhaps the most important hidden cost. Around 140,000 former
public servants are paid €3.1bn annually
Pensions are perhaps the most important hidden cost. Around 140,000 former public servants are paid €3.1bn annually

Here we go again. The Government has started talks to restore public sector pay to pre-recession levels. Critically, this process excludes 1.7 million non-State sector workers. Taxpayers and those dependent on welfare also have no say in critical decisions affecting their standards of living beyond 2017. Those representing employers will be personal beneficiaries for their future salaries and pensions. When determining whether the minimum wage should increase from €8.65 per hour there's preparatory independent analysis through the Low Pay Commission. But no independent body is put in place to consider all the criteria for public pay. Ministers have vested party interests in securing a populist vote-winning deal to gain re-election.

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The total Government pay bill in 2001 was €10.2bn. Subsequent to benchmarking and generous multi-annual increases, this rose to €17.6bn in 2007. While inflation was 18pc over six years, public sector pay rose by 59pc; the workforce increased by 38,000.

Post-crash, this was clearly unsustainable economically; pay costs were sustained only by deficits and borrowings. Private sector redundancies amounted to 330,000 - there were no compulsory redundancies in the public sector. Public sector pay peaked at €18.7bn in 2008. During the austerity years, numbers were rationalised from 279,000 in 2009 to 264,000 in 2012. If you exclude pensions, the current wages bill is €14.2bn.

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