BETWEEN 2003 and 2006 the pay premium for public sector workers versus comparable employees in the private sector rose from a cushy 10% to an astonishing 22%, according to the ESRI. After years of austerity, even trade unions like IMPACT will tell you that pay has now reached about parity with private sector peers. Despite this levelling of the pay gap, the public sector unions are riding straight back into social partnership mode, where the taxpayer is fleeced to raise the remuneration of public servants well in excess of what is justifiable.
The cuts to USC that began in Budget 2015 and that are set to continue in Budget 2016 represent a fair return to the pockets of all 1.9 million taxpayers at work now that the economy is on the mend. The USC cuts are capped at €70,000 to ensure that more of the money can be fed back to those earning low and middle incomes. If we continue with the USC cuts, a person earning €35,000 would be €175 a year better off for each 1% cut to the 7% rate. The maximum anyone earning €70,000 or above would get back would be €525 a year. Every 1% cut off this band of USC would cost the Exchequer €370 million in a full year.
Pay restoration or pay increase?
It is in this context that Labour has led the striking of a deal for the 290,000 or so in public employment that should make other taxpayers weep. At a cost of €566 million over three years, State employees will receive an average pay increase of €2,000 each over two years. Even if you net that off with tax, it represents at least double what some of the better-paid people in the country can expect to get back with a USC cut. And, of course, public sector workers will benefit from any tax cuts that the private sector chump is getting anyway.
Public sector union reps will immediately tell you that this €2,000 is pay restoration rather than a pay increase. I’ll grant them that, but would counter that the pay levels reached under benchmarking was unsustainable, unfair, and shouldn’t be restored at all.
Public sector workers have real advantages over their private sector counterparts
Public sector workers are now at or around parity with their private sector counterparts in terms of pay packets. But, added atop their gross pay, public sector workers have two real advantages on most others: firstly, public sector workers on permanent contracts did not lose their jobs even when the State went bankrupt and had to get an IMF bailout. That is gold plated, copper-fastened, unsinkable job security. There’s a reason why banks ask if you’re public or private sector when considering handing out a loan.
Secondly, public sector workers get a defined benefit pension when the rest of the sane world has switched to sustainable defined contribution pensions and many private sector workers on DB pensions have seen their funds wiped out in the recession. Again, the State literally went about as bankrupt as a State gets without defaulting on loans; and public sector pensions continue to be paid.
All those security benefits and now unions are returning to look for extra cash that would see public sector workers earning significant pay premiums on private sector ones once again? And to pay for the increases, we would need to hold off on delivering tax cuts to all workers, public and private?
That is madness, no matter what kind of spin the union bosses want to put on it.
Remember which public sector workers we’re talking about
We’ll be told is that these are pay increases for hard-pressed nurses, guards, other frontline emergency service workers and the like. That’s true. These people are not paid nearly enough for their dedication in jobs that are incomparable to anything in the private sector. They deserve more resources, more colleagues and more pay for doing the job.
They are not, however, anywhere near a majority of the 290,000 people in public employ. The whole justice service, for example, employed 12,787 at last count according to the Department of Public Expenditure. There’s twice that number working in local authorities, and three times in the civil service manning government departments.
On the side of the €2,000-a-head deal, the unions got into full greasy palm mode with little sweeteners for their members. In negotiations lasting well into the night we have since learned that a variety of “chairman’s notes” were taken, a euphemism for side deals. For example, the pay rates of general operatives in Dublin City Council will be examined. Pointing firmly at what the civil service really thinks of reform, the plan to open all recruitment at assistant principal level up to competition will go to arbitration, probably to be scrapped.
We need to make a stand against the return of Bertienomics
Deals like that tell us their own story. The public sector of forklift driving allowances for forklift drivers and of closed shop recruitment and promotion has not gone away. It may have been forced into a bit of a corner and taken a pay cut, but it’s ready to come out swinging now that there’s any money to be had once again. Public sector unions are the last great manifestation of protection rackets, lamenting at how awful it would be for the fragile economic recovery if the country was to be ground to a halt by strikes.
We need to make a stand against the return of Bertienomics in the public sector, where every threat by unions is bought off with taxpayer money. It might have looked alright during the credit-fuelled years of spending increases, when everyone got a bit; but to do it now, after all we’ve been through, would be criminally insane.
Public sector workers earn about the same as private sector workers when you account for comparable roles. They have a kind of job and pension security unheard of elsewhere. They should not now receive disproportionate pay increases over everyone else. Instead, this Government and future ones should return money to everyone’s pockets equally by means of tax cuts, and then ensure that pay increases in the public sector keep pace with real wage increases in the wider economy over time.
Aaron McKenna is a businessman on columnist for TheJournal.ie. You can follow him on Twitter here.
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