Plans for a new benchmarking study of public sector pay have been criticised by the Economic and Social Research Institute (ESRI), which said there was no justification for the exercise. It said the Government's decision to undertake it was "perplexing". Una McCaffrey reports.
ESRI senior economist Mr Danny McCoy said last week's move to incorporate a second benchmarking study into the new national wage agreement was a "surprise" given that the first study remained so controversial.
Speaking yesterday at the publication of the ESRI's Quarterly Economic Commentary, which delivered an upbeat assessment of the economy's prospects this year and next, he said he and many others were under the impression that the first benchmarking study was a "one-off" designed to create an "intercept shift" in public sector pay.
Civil and public servants were awarded an average pay increase of 8.9 per cent in the last benchmarking round, which ended in July 2002. Benchmarking is based on evaluating the jobs and pay of public sector workers by reference to comparable private sector jobs.
The data supporting the first study was never disclosed to the public, leading to wide-ranging criticism.
The commentary includes an article prepared by Prof Gerry Boyle, Mr Jim O'Leary and Mr Rory McElligot of NUI Maynooth, which concludes that Irish public sector employees are, on average, much better paid than their private sector counterparts.
The paper finds that even when factors such as the higher skills and higher education levels required by some public sector workers are considered, the public sector was paid about 13 per cent more than the private sector in 2001.
The authors said this was at odds with the perception that public servants "fell behind" during the Celtic Tiger period.
Mr McCoy said yesterday that the continuing lack of transparency on the first benchmarking round caused him concern. He said the methodology behind the first study should be made public so that its findings could be scrutinised.
"It's perplexing as to why a second bite of the cherry needs to be taken," he added.
The remainder of the new wage agreement is, however, largely sensible, Mr McCoy believes.
In an upbeat assessment of the State's short-term economic prospects, the ESRI has raised its gross domestic product (GDP) growth forecast for this year from 3.5 per cent to 4.6 per cent, and lifted its gross national product (GNP) forecast from 3.3 per cent to 4.3 per cent.
The upgrades reflect the "strong rebound" recorded in the Irish economy so far this year. A further improvement is expected in 2005.
However, Mr McCoy warned against taking the resulting strength in the public finances as a justification for large-scale tax cuts.
He said expectations of either tax cuts or greater spending growth would be "seriously misplaced", particularly since the Exchequer's current health had been flattered by large windfall receipts, such as the €650 million taken in by the Revenue Commissioners under its recent campaign on offshore accounts.
The public finances could, according to the ESRI, support tax cuts worth up to about €500 million next year.
The ESRI has concluded that the Government has scope for some "measures to help bolster take-home pay" by raising the tax bands and lifting the average industrial wage of €27,900 out of the higher 42 per cent band.
The standard rate threshold is currently €28,000, meaning that an average industrial worker earning even the smallest of overtime payments will often be pushed from the 20 per cent band into the 42 per cent band.