More Talk about Public v Private Pay

22/09/2009

The ESRI released a study today showing a gap between public and private pay. And IMPACT have released an objection to it.

But is there anything new in all this?

In many ways, the ESRI paper is academic. It is a twenty-one page report of a statistical comparison of 2003 and 2006 data, which means that it doesn't include recent changes, including further pay awards, but also pay cuts and the pension levy.

IMPACT argues that it doesn't compare 'real jobs'. Certainly, the statistical analysis doesn't seem to include trade union membership as a variable (although it does include 'membership of a professional body'). There is obviously a large different in the private sector between the 'good jobs' in large, unionised firms and the full range of private sector wages.

Are there any recent studies comparing unionised versus non-unionised levels of pay (cutting across the artificial public-private divide)? That would seem to be more pertinent. It also would refocus the question on the right to join a trade union and the right of workers to negotiate good wages. As mentioned before in relation to this issue, low wages lead to increased state expenditure, such as income supports, social housing, etc.

There probably needs to be more attention paid to the differences between managerial pay and other pay. Although there is less of a 'pay gap' at managerial level, because higher grades in the public service received higher awards in order to catch up with managerial pay in the private sector that had soared, that process failed to address the question of whether private sector managerial pay was reasonable in the first place. There probably is much more scope for re-examining managerial wages in the public sector than the broad wages of ordinary public servants - but that would involve a debate about what is a reasonable managerial wage.

The ESRI's figures, presumably from a press release, were trotted out on the radio yesterday. And the argument predictably turned to whether the public service is overpaid. But it is equally the case that workers in the private sector are underpaid, at least in some sectors. Again, it would be nice to see some international figures on this, based on purchasing power parity.

There is no doubt that the state's financial situation is dire, and some radical action will have to be taken in the immediate future. But Vincent Browne argued recently that the country's financial situation is nothing like as bad. There is still plenty of wealth in Ireland. So, it is a pity that the Government seems reluctant to grapple with the need for tax reform - and a large scale broadening of the tax base.

Further cuts in public wages will also surely depress the economy further. And then there are a lot of households who have taken out large mortgages on the basis of an ability to pay them back. Housing costs represent the stubborn bottom line in terms of the pay levels that people need to get by, and undermining people's ability to pay these loans will further weaken the banks.

All of this is to say that we are likely to see another round of arguments about public versus private pay in the media, but it is only part of the bigger picture.

Posted in: Fiscal policyFiscal policyPolitics

Tagged with: public sectoresriWage CutsPay Cuts

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