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Monday 19 August 2019

Our public and private wage gap is among the highest in Europe

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Anne-Marie Walsh

The Government has revealed that the gap between public and private wages is among the highest in Europe and the value of public sector pensions is at an all-time high.

The value of public sector pensions was thrown into the spotlight after independent consultant John Horgan estimated garda pensions are worth up to €40,000 a year on top of their earnings.

Now the Department of Public Expenditure and Reform's submission to an independent body set up to advise the Government on its wage strategy also said basic pay should not be dealt with in isolation when it considers its recommendations for a new report.

It said it "must be viewed as part of a total employment package" that includes elements that have a "significant" value, such as pensions, job security, and other terms and conditions.

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Click to view full size graphic

The Public Service Pay Commission's first job is to, early next year, draw up a report for the Government on further unwinding the emergency legislation that cut public servants' pay. It will inform talks with unions on a successor to the Lansdowne Road Agreement.

The document said diverting extra money to fund public service pay rises would "compromise service delivery" including "necessary" recruitment and investment in infrastructure.

Read more: Eoin O'Malley: Comparing public and private sectors is not like for like

The Department is currently working on an actuarial assessment of its occupational pension obligations. The document said this will provide valuable information on the expected cost of those pensions.

It also points out that, based on Eurostat 2015 figures, Ireland is ahead of both the Euro area and EU average public sector pay in terms of the percentage of overall government expenditure. Over 25pc of all government expenditure here is allocated to public sector pay - the second highest in Europe.

The submission compares the entitlements enjoyed by public servants compared with their private sector counterparts. It said:

46.7pc of those in employment between the ages of 20 and 69 have an occupational or private pension. However, it said that 100pc of public servants had a pension, while occupational coverage in the private sector is around 35pc;

Most public servants are in defined benefit schemes where the value of their pension is linked to their final salary. In the private sector, it said nearly all defined benefit schemes are closed to new entrants and in recent years many of these schemes have been wound up;

30pc to 40pc of private sector schemes are in deficit on the statutory minimum Funding Standard due to low bond yields, people living longer, and poor equity market returns;

Pension costs are rising, which has led to a significant number of private sector employers moving to defined contribution schemes. The submission concludes these benefits are likely to have increased the value of pensions beyond a 12pc discount to pay. It also said the gap between public and private wages is among the highest in Europe.

Read more: Pay gap of up to €1.8k a year will open in January between ASTI and non-ASTI young teachers

Meanwhile, it has emerged the Department of Justice will have to find half of the cost of funding the €50m Garda pay deal that averted a threatened strike.

The Government has agreed a "burden-sharing" approach to cover the additional costs, with €25m coming from Justice and the remainder to be found across all other departments.

A spokesman said the sum provided by the Justice Department will come through "re-prioritisation and efficiency measures" designed not to impact "crucial services".

Irish Independent

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