UNITE Responds to Flawed Analysis of Public Sector Pay

A recent article in the Irish Times shows how data can be manipulated to serve the most flawed arguments.  For the attack contained in the article is directed not just at public sector workers – ultimately it is directed at the living standards of all workers.  Public sector workers are just the latest pretext.

The article claims:

‘The degree to which public sector workers benefited from the unsustainable inflow of tax revenues during the property bubble years should not be in question.’

What it doesn’t say is that the public sector didn’t benefit any more than the private sector.  The CSO shows the following:

Irish Times 1

Two things to note here:  first, the difference in pay increases over this nine-year period, which covers most of the boom period, is small.  This even covers the benchmarking in the public sector (which many commentators insist gave public sector workers an additional increase over private sector workers).  Given all that, the differences between the sectors are not significant.

Second, it should be noted that public sector workers benefit from an employer that recognises trade union membership and collective bargaining.  In the private sector workers don’t have this benefit.  Why is this important?  As UCD’s Professor Frank Walsh recently reported to an economic conference:

‘The pay premium enjoyed by trade union members is between 8 per cent and 10 per cent.’

Irish law doesn’t recognise worker’s bargaining rights – unlike almost every other industrialised country.  If private sector workers had this right, their incomes would, on average, be expected to be higher.  But the Government, in collusion with employers, have worked to depress incomes in the private sector by denying labour rights in the workplace.  It will be interesting to see if commentators who complain that private sector wages are too low vis-à-vis public sector wages, will support the right to collective bargaining.

Tends Since the Crash

What has happened in average weekly income trends since the crash?

Irish Times 2

Average incomes in the private and public sectors, according to the CSO, have fallen by 3.2 and 3.6 percent respectively.  However, the CSO doesn’t factor in the pension levy that was imposed in early 2009.  This is because the pension levy doesn’t reduce the gross pay, though it hits take-home pay.  Had the Government just cut this off the top –as would be done in most pay cuts – public sector average income would show a fall of approximately 9 percent (or 7 percent when tax relief is factored in).  This could change slightly depending on the changed composition of the public sector workforce with different rates of pension levies.

So, we have two trends.  One, before the crisis, which shows that public and private sector pay increased at approximately the same rates during the boom period. Since the crisis, public sector pay has fallen be a greater amount in the private sector when the pension levy is factored in.  But what about the private-public pay differential?

Public Private Pay Differential

The graph in the Irish Times article produces is wholly misleading.  Not only does it not factor in the pension levy, it shows the weekly income between categories of workers that are not comparable.  There are no public sector equivalents of hotel, retail and restaurant workers; there are no private sector equivalents of Guards, soldiers or fire-fighters.  What is needed is a like-for-like comparison.

The CSO has produced such a comparison – using factors such as occupation, length-of-work, age, trade union and professional membership, size of employment; all factors that influence pay scales.  This is what they found.

Irish Times 3

According to the CSO, permanent full-time public sector employees earn between 7.3 and 8.5 percent more than their private sector counter-parts on a like-for-like basis.  Interesting, however, is that this falls for males to between 3.5 and 5.4 percent.  A large part of the pay gap is the earnings of women; in the public sector gender pay gap is far less than in the private sector.  If anything, the problem lies among private sector employers who perpetuate an unacceptable large gender pay gap.

This analysis take us a long, long ways from commentary that is hostile to public sector workers’ living standards.  There is considerable dispute about the methodologies measuring the public-private pay differential.  The ESRI takes exception to the CSO’s method – you can read this here (unlike other commentators who refuse to inform the debate, UNITE has no problem in providing the contrasting perspectives; we believe, however, that the CSO method is superior but you can make up your own mind).

But in all this there is a big, big caveat – the above differentials do not include the pension levy.  If it did, the pay gap would almost disappear with males in the public sector actually earning less than their private sector counterparts.

A More Equal Pay Structure

What may motivate many commentators’ hostility to public sector workers’ wages is that the pay structure is more equal than the pay structure in the private sector where ultra-high and ultra-low pay rates prevail.  The following graph is taken directly from the CSO publication.

Irish Times 4

This shows that low-average income earners in the public sector earn more than their private sector counter-part; in particular, women.  However, this gap narrows the higher one goes up the income scale until it hits €60,900 where the public sector worker actually starts falling behind their private sector counterpart.   UNITE is very clear on this issue.  If the pay structure in the wider economy reflected that in the public sector:

  • The recession would not have lasted as long because there would be higher demand from better paid low and average income earners (low-pay reduces demand and, therefore, drives recessions).
  • There would be less in-work poverty and deprivation (there are over one million people officially categorised as suffering deprivation – 50 percent of these are households where there is at least one person in work).
  • There would greater income equality which has been shown to have a number of beneficial social effects; in particular, health.

When commentators attack public sector pay they are actually attacking a more equal distribution of income and living standards in society.

Sharing the Pain Or Shedding Out Even More?

Some commentators claim that since private sector workers have lost their jobs, public sector workers should share the pain through wage cuts.  What this commentary misses (either deliberately or through ignorance) is that this ‘pain’ is causing even more job losses in the private sector.

The ESRI estimates that between 3,500 and 4,000 private sector jobs for every €1 billion cut in public sector wages.  In addition, for every 1,000 jobs lost in the public sector, 130 jobs are lost in the private sector.  On this basis, between 13,000 and 14,000 jobs have been lost in the private sector due to cuts in the public sector payroll.  So much for protecting private sector jobs.  This is not about ‘sharing the pain’ between the public and private sectors; this is about inflicting pain on all workers for a crisis they didn’t create; inflicting pain on all workers regarding of which they sector they work in – the private, public or voluntary sectors.

So, when commentators come bearing graphs and data claiming that this wage or that wage is unaffordable or ‘uncompetitive’, it’s almost always a pretext – to cut workers’ living standards.  And it doesn’t matter what sector these wages are earned in – UNITE’s Jimmy Kelly recently responded to the attacks on private sector wages by the Central Bank.  Today, its public sector wages.  Tomorrow it will be private sector wages – again. Then it will be low-paid.  And the next day it will be someone else.  The wheel of austerity and wage cuts continues spinning.

It’s all part of a piece.  And the facts are always secondary.

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2 Responses to UNITE Responds to Flawed Analysis of Public Sector Pay

  1. Pingback: Croke Park 2: a done deal - Page 230

  2. Pingback: PS pay, now banks, who is next for the chop? - Page 7

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