Friday 20 September 2019

Dan O'Brien: 'If the economy turns down next year, austerity will return and private sector workers will pay the price'

It is also noteworthy that average weekly earnings in the public sector are now back above levels of early 2008, before any austerity measures were introduced. Stock image
It is also noteworthy that average weekly earnings in the public sector are now back above levels of early 2008, before any austerity measures were introduced. Stock image
Dan O'Brien

Dan O'Brien

The taxman is hiring. Between now and next March, the Revenue Commissioners plan to recruit 200 additional people to cope with the Border issues that Brexit will create. Staff numbers will rise by another 400 later. News reports this week suggest that more than 3,000 people have applied for these jobs.

Earlier this year, An Garda Síochána received 6,000 applications for a few hundred positions in the force.

The huge demand for these public sector jobs is not explained by mass unemployment or because there are no jobs available elsewhere in the economy. On the contrary, the unemployment rate stands just over 5pc and hundreds of thousands of private sector jobs have been created in recent years.

If public sector job openings are massively over-subscribed in a low unemployment economy, it means just one thing: that the packages being offered are very attractive.

That was evidenced yet again last Monday when the latest figures on pay rates across the economy were released. They show that the average weekly earnings of public sector workers have hit a new record high, standing at a seasonally adjusted €961 per week in the July-September period of this year.

It is also noteworthy that average weekly earnings in the public sector are now back above levels of early 2008, before any austerity measures were introduced. This reflects the Government's prioritising of public pay "restoration" in the years since the economy turned around.

The Central Statistics Office publishes the earnings figures with all the rigour one expects from professional statisticians. Its British counterpart, the Office of National Statistics, does the same. Its latest numbers on public and private sector pay show a very different picture from the one pertaining in Ireland.

Here, public sector employees are hugely better remunerated than their counterparts in the private sector, earning 40pc more each week on average.

The latest figures show that people paid by the British state actually earn less (by a fraction) than those who are employed by private companies and organisations.

The huge disparity in the pay premium enjoyed by Irish public sector workers compared to their British counterparts is not explained by any big difference in the structure of state in the two countries. Both are very similar in that they employ healthcare workers, educators, civil servants and municipal employees.

So why is Irish pay massively unequal when its immediate neighbour has near perfect equality in pay between the two sectors?

The answer is simple: the unwillingness of successive governments to put fairness before powerful vested interests.

To make this point is not to be 'anti-public sector' or even hostile to the bodies which represent public sector workers.

As shown in today's annual report on what the State does, published by the Institute of Public Administration, there is a huge amount that is good in the public sector - from education and health to the many more technocratic functions of Government.

Nor is the huge public sector pay premium the "fault" of trade unions as such. In a free society, it is a core civil right that people can come together to represent their collective interests.

Lobby groups may not always be edifying in their activities and how they spin issues, but it would be a violation of fundamental rights to stop them from making the case for their members.

That public sector trade unions have long been one of the most effective lobby groups in the State is because successive governments have been unwilling to face them down.

Instead of standing up for the collective national interest, as governments that are committed to fairness do, successive administrations in Ireland have caved in to insider pay demands.

The result is that people who are, on average, less well paid transfer wealth to a group that is not just considerably better off, but who also enjoy much greater job security and pension benefits.

The Government's prioritising of public pay increases is not just financially very unfair to those who have to pay for it, it also unfair in terms of security.

If the economy turns down, be it as a result of a hard Brexit or for any other reason, people in the private sector will lose their jobs. People in the public sector do not have to worry about being laid off.

If the Government was serious about making those who work in the private sector more secure, it would have ensured that it had leeway to counteract the effects of any downturn. But it has very little. The Irish State is one of the most indebted in the world and the Government is still spending more than it takes in.

The sums underpinning Budget 2019 are shaky enough as it is. A mere slowdown in economic growth would cause fiscal and political problems. A slump would cause the public finances quickly to veer off the rails.

The riskiness of the Government's approach was highlighted yesterday by the watchdog established after the crash of 2008-12 to help ensure that politicians' recklessness does not cause yet another economic train wreck.

The Fiscal Advisory Council was commendably clear in its message and blunt in its delivery.

"The Budget 2019 plans are not conducive to prudent economic and budgetary management," it said in its assessment of the Government's fiscal targets.

"Repeated failures to prevent unbudgeted spending increases have left the public finances more exposed to adverse shocks," it stated.

"The medium-term budgetary plans are not credible," it declared.

The economists on the Council have set out clearly the scale of the risks the Government is running. It has run these risks despite ample opportunity to get the public finances safely back into the black, thanks to falling debt-servicing costs and windfall corporation tax revenues.

If the economy turns down next year, the Government won't be in a position to cushion the blow.

More likely it will make matters worse by having to reintroduce austerity.

You have been warned.

Irish Independent

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