This is a link to a table outlining the annual earnings of public sector workers. It was produced by the government after a question in the Dáil by Ruadhri Quinn.
- 18 per cent earn less than €30k a year
- 31 per cent earn less than €35k a year
- 43 per cent earn less than €40k a year
- 54 per cent earn less than €45k a year
- 66 per cent earn less than €50k a year
- 76 per cent earn less than €55k a year
- 85 per cent earn less than €60k a year
So, over 60 per cent of public sector workers earn less than €50k a year and 43 per cent earn slightly above the average industrial wage. These are not figures that merit media commentary about public sector ‘fat cats’ we have witnessed since the ESRI published its findings on the wage differentials between the private and public sector. These are good salaries and reflect the very good working conditions that those employed by the state enjoy. But, surely this is a good thing? One would expect the state to be a good employer that renumerates fairly, and it does. Furthermore, these figures do not contain the pension levy which reduced earnings by at least 6 per cent.
Presently the government have signalled it is not in a position to pay the transitional national wage agreement. IBEC have yet to signal whether they are in or out of the agreement. Over 150 private sector companies have paid the wage increases from the transitional agreement of T2016. Small and medium size businesses have begun to reduce wage costs and are shedding jobs. But, the only concrete evidence to date (IBEC survey) has shown that private sector companies have mainly introduced wage freezes not wage cuts.
In effect, we are under going a collective wage freeze in the economy with the exception of some profitable sectors who are paying the T2016 wage increases. Wage freezes are necessary in the public sector but not sufficient on its own to fix the public finances. Up until August 2008 it was generally accepted that centralised wage bargaining instituted wage restraint. But now a consensus is emerging that national wage agreements (social partnership) led to the complete opposite. This is an easy and simplistic response that fails to contextualize income policy in the wider reality of a grossly exaggerated asset price bubble. It can hardly be expected that wages post-2000 would remain restrained during a period when the ECB was cutting interest rates, and house prices rising by 10 per cent a year?
To genuinely tackle the economic crisis (finance, jobs and credit) we need an honest debate about income policy in both the private and the public sector. There are elements of the private sector, not the SME’s, but in large MNC’s that paid well above the national wage agreements since 2000. In this sector, centralised collective bargaining set a pay norm that was a floor not a ceiling. In most sectors (exposed domestic and sheltered public sector) it was a ceiling.
If a cut in public sector pay occurs it might curb our borrowing slightly. But, it will also take out a huge amount of consumer spending in the real economy with knock on effects in taxation, given that we are so reliant on indirect consumer taxes. This is not an argument against a reduction in the public sector wage bill but a proposal for a genuine cost-benefit analysis on its effects in the real economy, and short term supply of revenue to the state.
Presently such a discussion has not taken place in the Irish public sphere, nor has it been helped by the policies of the EU commission. We need a debate that involves an examination of income policy across the entire economy (and not based upon untruths about the public sector) with joined up thinking about the likely effects of a reduction in expenditure. 85 per cent of the public sector earn less than €60k and this is around 300,000 people. That is more than a group of employees. It is a significant group of consumers. So, even on purely economic grounds, without recourse to legitimate equity concerns, cutting pay may be counter productive. But the EU commission has effectively demanded a €4bn reduction in public expenditure. In the absence of pay cuts, social welfare will become the target of savings, which is even more inequitable.
There is a case for a collective reduction in pay across all sectors of the economy. But, for those who can afford it. This will have to include those on the average industrial wage. However, a more efficient and equitable way is to do it via the income tax system. Our income tax revenue is the same as Estonia, Lithuania and Latvia. This is completely unsustainable. It needs to be broadened and made more progressive. But, a collective and simultaneous reduction in consumer prices, energy costs and wage costs, coupled with the introduction of a progressive taxation system (and immediate closure of tax loop holes) with the overall objective of maintaining and creating employment is probably the ‘ideal’ way to go. This, however, would require a hugely ambitious national agreement by the social partners (including SME’s) and a government that was perceived to be legitimate in the eyes of the electorate.