The renegotiations over the Croke Park Agreement look to get busy over the weekend. The one question that is never asked is how many private workers will lose their jobs because of the proposed cuts to the public sector? How many jobs will be lost from public sector wage cuts and from cuts in public sector employment? We’re going to ask it and try to answer it.
We all know that if large numbers of workers find their wages cuts, they will reduce their spending in the economy. This, in turn, means that businesses will find sales and turnovers cut. This can result in those businesses cutting their own employees’ wages, working hours and, possibly jobs. The same thing happens if employers cut their workforce – fewer people working, less money being spend, more unemployment costs.
In terms of the economy, it doesn’t matter if the employer doing the cutting is a public sector or private sector employer. The effect is the same. Ask residents of any town that has lost a large employer.
The Government is seeking €1 billion in public sector cuts. So how many private sector jobs will be lost? It is hard to estimate since we don’t know the breakdown of the deal (between wage cuts and job cuts). But we can make an estimate by looking at the impact of past cuts. We will do this with the aid of ESRI multipliers.
Let’s first review those past cuts:
- Public sector employment has been cut by 29,525 between 2008 and 2012 – an average of nearly 7,400 per year.
- Public sector pay has been cut twice – the pension levy in early 2009 (equivalent to €1,400 million) and the Budget 2010 pay cuts (equivalent to €1,000 million).
So what has been the impact on private sector employment to date from these cuts?
Over 12,000 jobs have been lost in the private sector from these cuts to date. But this is likely to be an under-estimate. First, the ESRI projected the impact of the cuts against a background of rising employment (they first developed these multipliers in 2009). However, there have been continual employment losses. Cuts made during a jobs recession are likely to have a more depressing impact.
Second, the ESRI didn’t assess the impact of household debt (this would be difficult) which means that workers may have been cutting spending even more than in the baseline projections used by the ESRI.
What has been the total impact on employment in the economy arising from cuts to the public sector to date?
There are over 40,000 less people working because of the cuts. This begs a number of questions: how many businesses have had to close, how many private sector workers have had their wages or working hours cut (falling employment puts downward pressures on wages and weekly income), how much more has this cost the state in unemployment payments which has resulted in cuts in other areas (Child Benefit, respite grants, etc.)?
The cuts to date have caused a lot of pain – both to private and public sector workers. Because of the impact on public finances (less tax revenue, more unemployment costs), it has caused a lot of pain to those reliant on social protection. In short, cutting jobs and wages during a recession can do nothing else but cause pain throughout the whole of the economy.
There has always been an alternative – outlined by UNITE and the trade union movement – based on growing our way out of the economic and fiscal crisis. But Governments haven’t listened.
And if what is going on in the Croke Park renegotiations is anything to go by they’re still not listening.