ECONOMICS: Public and private sector are different animals- low-skilled public servants get more than private counterparts but the reverse is true at the top

The Expert Group on Future Skills Needs published its National Survey of Vacancies last week. According to the survey, the vacancy rate in the private sector (the number of vacancies as a percentage of the total labour requirement) was just 3.3 per cent in early 2002. This compares with estimates of 6.4 per cent and 5.8 per cent respectively for 1998/99 and 1999/2000, corroborating the range of other evidence that points to a marked softening of the labour market in recent times.

For the first time in its short history, the survey has been extended to the public sector, an interesting extension in the light of the benchmarking exercise, and all the more valuable because of the absence of such data from the Public Service Benchmarking Body report.

It is estimated that the vacancy rate for the public sector in early 2002 was 4.1 per cent, higher than the private sector, but by a very modest margin. This suggests that the public sector as a whole did not face especially acute recruitment and retention problems, at least this time last year.

How the vacancy rate in the public sector stacked up against its private sector equivalent two or three years earlier, when labour market conditions were at their tightest, we will never know because such data do not exist (and, if they did, they'd probably be an official secret).

Of course, a bald comparison of aggregate vacancy rates between the two sectors is not very informative. As the survey makes clear, the occupational profiles of public and private sector employment are quite different.

For example, 29 per cent of public sector employment comprises what are classified as "professional" occupational groups, compared with just 8 per cent for the private sector. At the other end of the scale, 16 per cent of private sector employment is composed of production operatives, an occupational grouping that is entirely absent from the public sector.

What all of this means is that the vacancy data for the different occupational grades are much more interesting than the aggregate data.

In the private sector, vacancy rates were bunched reasonably tightly around the 3 per cent average, and ranged, with only one exception, from 1 per cent to 5 per cent. The exception, skilled maintenance and skilled production, recorded a rate of 8 per cent. Next highest, at 5 per cent, were science professionals and engineering technicians.

At the other end of the scale were managers/proprietors (1 per cent), clerical and secretarial (2 per cent) and production operatives (also 2 per cent). In each of the latter cases, it is reasonable to adduce the vacancy rates as manifestations of normal turnover rather than as evidence of labour shortage.

Another feature of the private sector data worth noting is that there is no systematic tendency for vacancy rates to vary with skill levels. In other words, in the private sector, vacancy rates were as likely to be above average for relatively low-skilled occupational groups as for relatively high-skilled groups.

The pattern in the public sector is very different in two important respects. In the first place, vacancy rates across occupational groups are much more variable, ranging from 1 per cent in respect of the skilled maintenance and skilled production and transport and communications categories all the way up to 12 per cent for engineering professionals and 13 per cent for computer technical staff.

This points to the existence of especially acute recruitment and retention problems in particular grades and, to the extent that pay is an issue (and it is by no means the only one), suggests that remuneration policy in the public sector lacks the flexibility to address specific skill shortages.

The solution to this problem is not to increase pay for all public servants, but to provide public service employers with the discretion to respond flexibly to market pressures.

Secondly, it is notable that, in the public sector, the lowest vacancy rates are generally to be found among the relatively low-skilled occupations and, by extension, the highest vacancy rates are to be found among the high-skilled categories. Of the 16 occupational categories for which the survey reports separate vacancy rates, the top eight (by skill level) yield a simple average of 6.6 per cent and the bottom eight an average of 3.2 per cent in the public sector.

The former figure is significantly higher than the corresponding private sector rate of 3.6 per cent, while the latter figure is lower than the private sector equivalent (also 3.6 per cent).

Again, subject to the caveat that pay is not the only contributory factor, this is consistent with the existence of a more compressed pay distribution in the public sector.

Incidentally, this is precisely what international research on public-private pay differentials indicates. In countries where such research has been carried out (US, Britain and Germany, for example), low-skilled public servants tend to be paid more than their private sector counterparts, while high-skilled public servants tend to be paid less.

What about straight comparisons between individual occupational vacancy rates across the two sectors? Well, there are several cases where the public sector vacancy rate is decisively higher: most notably engineering professionals (12 per cent against 3 per cent) and computer technical staff (13 per cent against 4 per cent); but also engineering technicians (7 per cent against 5 per cent) and science technicians (6 per cent against 4 per cent).

Of course, one cannot take these differentials as cast-iron evidence of uncompetitive public sector salary levels, since trade union-inspired restrictions on recruitment, for example, contribute to the problem of high vacancies. Having said that, it is remarkable that it is in respect of grades that fall within these categories that the benchmarking body made the smallest pay awards.

Typically, the engineering and science grades that came within the benchmarking body's remit were given pay increases in the 4-5 per cent range, compared with the 9 per cent average.

Contrast this with the position of teachers. Teachers were awarded a 13 per cent pay increase by the body. But, it seems from last week's survey that they are among the public sector groups with the lowest vacancy rates. On an occupational basis, the other professionals category (which is made up mainly of teachers) had an estimated vacancy rate of just 2.8 per cent, while for the education sector as a whole, the vacancy rate is estimated at just 2.4 per cent.

In summary, last week's survey results do little to vindicate the economic logic behind the benchmarking awards.

• Jim O'Leary is currently lecturing in the Department of Economics at NUI-Maynooth. He can be contacted at jim.oleary@may.ie