Public, private pay gap leapt between 2003 and 2006

THE GAP between pay levels in the public and private sectors “increased dramatically” in the 2003-2006 period, according to a new study.

The public sector “pay premium” increased to 21.6 per cent, from 9.7 per cent, during the period, according to the study by researchers at the Economic and Social Research Institute.

They say their study’s findings are probably “conservative” and the differential would be even higher if later pay awards and other factors were taken into account. The study does not take into account the increased value of public sector pensions as compared with private sector pensions, or the value of the increased job security that exists for public sector workers.

The authors of the study say the findings “raise serious questions with respect to the justification for any further boost to the pay levels of public sector workers”.

The study found that, by 2006, senior public sector workers earned almost 8 per cent more than their private sector counterparts, while lower-grade public sector workers earned between 22 and 31 per cent more.

On a gender basis, it found the public sector pay premium increased to 23 per cent from 5 per cent for females, and to 21 per cent from 14 per cent for males, over the 2003-2006 period. The authors say empirical evidence supports the contention the 2002 benchmarking award was wrong and, at the time, public sector workers were ahead rather than behind private sector workers.

Quoting the International Monetary Fund’s opinion in 2006 that “generous increases” in public wages since 2001 had damaged Ireland’s international competitiveness, the authors go on to state: “Thus, not only do the results derived in this paper provide no support for the recommendations of the 2007 benchmarking report, or the General Review Body reports that called for further upward adjustments in the salary levels of some senior public service grades, but they also suggest that if such increases were to be awarded then this would further undermine Ireland’s current drive to regain its competitiveness.”

The study compared wage levels in the two sectors, ranking earnings with employees’ “human capital characteristics” rather than using the “job evaluation” techniques used by the benchmarking review body. The authors say their method is the standard international method.

When their findings were adjusted to take account of the fact employer-based pensions are more widespread in the public sector than in the private sector, the authors found that the public sector premium increased by 3.2 percentage points.

“The results imply that had the impact of the differences in pension coverage been incorporated into the econometric assessment

Pay award process has moved public sector clear of private: Opinion, page 14