The issue of raising wages for top-level public sector workers, and whether we can afford it, has recently accounted for a significant amount of column inches.

Former civil servants, with the joy and privilege of working with civil servants on a regular basis, know their dedication and commitment, and how it is poorly rewarded and unrecognized.

Teachers, airport staff and nurses face the same challenges as low-paying people in the private sector in terms of living costs and housing crises. It is very important to say this. Because, if not treated carefully, the upcoming effects of inflation and the government’s response to it can be deeply divided socially and politically.

But in reality, there is a deep economic and political division between the strong, unionized public sector that can be negotiated and the indigenous private sector, which is almost impossible to negotiate.

As my April 2020 book Economic reaction to Covid-19 As explained, the private sector itself is divided into a strong multinational sector with government ears (including institutional investment funds) and a much more vulnerable indigenous sector that is having a hard time listening. ..

The book describes how the latter sector in the previous global financial crisis has a longer U-shaped recession compared to the rapid recovery of the multinational sector and the relative stability of the public sector. I analyzed if I suffered from.

A few months ago, the government held an event just to abandon an event investigating what was already a funding crisis for small businesses at the time. Of the 13 speakers, only one represented SMEs.

At the time, I was afraid that an unbalanced policy debate could lead to a false reaction to Covid-19. Thankfully, that balance has been partially corrected, but we’re back in the discussion of inflation, with little voice from private sector taxpayers and SMEs.

Inflation is not about walking in the park for everyone. However, according to published headline figures, headline public salaries are, on average, one-third higher than private sector levels. As reconstructable Mick Lynch, the general secretary of the British Rail, Shipping and Transport Union, who is currently involved in major domestic industrial disputes there, is a public sector worker who endures real difficulties. There is.


If not treated with caution, the future impact of inflation and the government’s response to it can be deeply divided socially and politically.Photographs, Public Expenditure and Reform Minister Michael McGrath

However, they often have safe work and pensions compared to low-income private sector workers.

Wage inequality between sectors is actually much lower, with some arguing that factors such as improved qualifications, extended service, larger public service institutions, and pension taxes are used to justify the measure. increase.

However, as we have seen from HSE, higher qualifications do not guarantee performance.

Also, the large size of the organization and the long employment period reflect relatively high employment security and exemptions from headcount reductions compared to the private sector.

Therefore, quoting these as factors is arguably invalid (if you do not rub salt on the taxpayer’s wounds). And while resentful, pension taxes are just a small part of what a private sector worker-if he / she can afford it-has to pay to get a civil servant pension.

In reality, the public-private wage gap is realistic and substantive, not only from justified factors, but also from stronger political power and lobbying.

of Economic reaction to Covid-19 He explained how that imbalance distorts fiscal policy.

Compared to the roughly balanced “austerity” of 2008 and 2014, about 12 billion euros were spent on tax increases and “control” of spending (“control” because spending actually increased during that period), respectively. When it was done, the fiscal policies of 2015 and 2019 are very biased towards taxpayers.

Spending increased € 16 billion annually between 2015 and 2019, with a net tax cut of only € 700 million. The failure to return private sector after-tax wages to pre-2008 levels is a major cause of the cost-of-living crisis, which was severe even before recent inflation.

Especially now, the barbaric cuts in mortgage interest relief leave homeowners cruelly and unjustly exposed to rising ECB rates starting two weeks later.

So the question is not whether we can afford to raise public wages, but if possible, whether we can afford to bring private sector after-tax income back to 2008 levels.

In answering that question, it is fair to note that those who dominate the so-called national economic dialogue will primarily benefit from more taxes and spending, as this underpins their wages and pensions (and that). The procedure is reported by the national broadcasters themselves asking for more state funding).

Salaries and pensions for politicians and civil servants are linked to each other, and research institutions such as ESRIs and universities benefit from generous salaries and national subsidies for pensions. In addition, top-level recruitment in the public sector appears to lack diversity from a private sector perspective, and data from administrative laboratories show that less than 10% of such roles come from outside the public sector. It suggests that it is satisfied.

When it comes to pensions, the 2020 actuarial review simply eliminates one (very generous) feature of public sector pensions (the fact that pensions increase with rising public salaries). Saving € 23 billion over the next 50 years and the increase in PRSI proposed by Taoiseach. In contrast, further salary increases will increase this burden.

In summary, given the aforementioned advantages of those who benefit from salary increases in policy setting, it is difficult to see already fragile social contracts overcoming salary increases without fundamental and unprecedented reforms.

Marc Coleman is the Managing Director of Octavian Economics and a former European Central Bank and Treasury Economist.

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