Almost six months ago, annoyed by the poor standard of debate in response to a particular question on Questions & Answers, I compiled estimates of what the average pay was in the public and private sectors. The overall finding was that average pay in the public sector was almost €50,000 per year, compared with less than €40,000 a year in the private sector. In the lengthy comments that follow that blog entry, amateur statisticians of all sorts came up with incredibly inventive explanations as to what might explain these differences and still be consistent with pay be approximately equal across both sectors.
Unfortunately for them, the evidence is overwhelmingly stacked against them. For example, a 2008 study by the ESRI showed that, holding things like occupation level, job type and experience constant, the degree to which the public sector enjoyed a premium over the private sector varied from 10% at the top to 30% for other grades. This corroborated evidence from the time of the initial benchmarking exercise in 2002 that – contrary to sentiment and popular belief within the public sector – pay differentials, and their consequences for recruitment and retention, were not significant issues in the public sector in the period 2000-2002. Research by Frances Ruane and myself found that if anything the pay differential was skewed in favour of the public sector, something which seems indisputably to have been the case all along. Now, the latest figures from the CSO have been analysed and Davy have found – again! – that grade for grade, age for age, hour for hour, the public sector enjoy a huge premium of anything up to 70% (on a per hour basis) over their private sector colleauges. Honestly, to people like Ernie Ball in my comments section, how much more evidence do we need?!
Ireland now finds itself in the following situation:
- Firstly, our public finances are in a woeful state, with gross spending set to top €64bn this year, and tax receipts of €34bn or so. Everyone can agree we need to cut expenditure and raise taxes.
- Secondly, employment in the private sector is rapidly contracting. While Live Register figures may overstate the case, CSO figures compiled through surveys show a 12% fall of almost 170,000 in the numbers employed by the private sector. The ability of workers to stomach tax hikes is diminished, placing the onus on the government to cut expenditure.
- Thirdly, two thirds of government expenditure is pay. Now, total pay = average wage * number employed. Personally, while there may be some room for cutting the numbers employed in the public sector, I think this should be avoided in times of rapidly increasing unemployment, so as to not make a bad unemployment situtation worse. Therefore, if the number of persons employed is not going to shift that much, then the average wage they enjoy must.
- Fourthly, it is now impossible, for the reasons outlined above, to make the case that the public sector is not overpaid. We must have another benchmarking exercise immediately, this time with an open methodology, so that people can see how any why they’ve fared the way they have.
This isn’t picking on the public sector for ideological reasons, or as David Begg called commentators recommending public sector cuts people with “ice in their veins“. This is the bare minimum needed by the country to ensure its economic survival. The unions say that the better off must bear the brunt. Does that include the better off of their membership?
For context, below is the chart from February updated to reflect the latest figures and including a separate series for semi-states and estimates for the health sector, based on the HSE annual reports and the Department of Finance figures on voted expenditure. The health figures seem particularly difficult to get, so my estimates are gross pay figures, minus pension/supperannuation and employers’ PRSI. All suggestions or recommendations for further refinement welcome, as per usual.
They say a picture tells a thousand words…