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Public pay talks: Government must – and can afford to – do a little better to secure the deal it wants

Current offer on the low side and backloaded to minimise benefits to workers, with no great advantage to Government, says economist

Minister for Public Expenditure Paschal Donohoe and Minister for Further Education Simon Harris at Technological University Dublin's Grangegorman campus on Thursday. Photograph: Cillian Sherlock/PA Wire

Emmet Malone's face
Emmet Malone
Thu Jan 11 2024 - 21:55

There may be a certain amount of scepticism regarding the tone of the public sector unions’ side’s reaction to the pay offer tabled at the Workplace Relations Commission on Wednesday night, but there is sense, too, that the Government will have to do at least a little better to secure the deal it wants.

Reacting to just the headline figures – the global 8.5 per cent offer highlighted by Minister for Public Expenditure Paschal Donohoe when discussing the issue on Thursday – Bill Roche, Professor of Industrial Relations & Human Resources at UCD’s School of Business, said that this figure, over 30 months, or 3.4 per cent annualised, was perhaps slightly lower but “broadly in line with many pay deals in the private sector”. It would, on the basis of ESRI projections, “involve an increase only marginally ahead of inflation” for the coming year for the country’s 385,000 civil and public sector workers.

But, he says, “unions now clearly expect significant real pay rises, reflecting the overall health of the public finances and the economy. They seem likely to obtain this, facing into an election year, and with the benefits of multiannual deals now well established.”

[ ‘Real pity’ unions rejected public sector pay offer of 8.5% rise over two years, Donohoe says ]

Armed with the actual structure of the proposal, however, Austin Hughes, formerly an economist with KBC Bank, feels the offer was on the low side and, at least as importantly, backloaded in a way that minimised benefits to workers while not really providing any great advantage to Government.

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The unions had arrived at the process making it abundantly clear they felt their members had lost spending power over the course of the last pay deal, because of jumps in the cost of living. Donohoe did not specifically deny this point when speaking on Thursday.

He focused instead on his belief that the increases offered over the coming 2½ years are greater than the level of anticipated inflation, so there would be real-terms gains for those affected. The low-paid would see their pay rise by up to 12 per cent.

Hughes, though, says that the provision, for most of those to be impacted, of a 1.5 per cent increase on March 1st and 2 per cent on October 1st keeps the overall benefit in 2024 close to the 1.5 per cent mark.

[ Public sector pay: How did the State’s €2.9bn offer add up? ]

That has the effect of making the wider deal feel curiously backloaded, something he is puzzled by. It was clear the unions would want more money upfront, given recent and current inflation levels, and the Government is not in a position where it has to push the added costs involved down the road.

“If you want a pay deal that actually compensates people for the cost-of-living increases,” he says, “the higher element of the pay should be in 2024, rather than ‘25 and ‘26.

“Overall,” says Hughes, “it looks too backloaded and a little too low to actually make sense.

“For my money, it probably could be a little more generous, probably averaging another half a per cent per year, over the period, but, much more importantly, it needs to be front-loaded. All the forecasts are that inflation is going to come down over the next two years and this is not going to negatively impact on that.

“If you look at the ECB’s projections for compensation of employees over the next three years, I think they work out about 3.9 per cent, and beyond that I think there may be a certain public sentiment in terms of rebalancing things for frontline public sector workers at a time when the economy and private sector employment are strong.

[ Pensions: Pre-2013 public servants have the golden ticket while younger employees pay the price of reforms ]

“On top of that, you just have to look across the water at the political carnage, the social and economic dislocation that is coming from a wave of public sector strikes, to suggest there is an economic and social rationale for paying a small premium for peace here at a time when cost of living pressures are significant.

“It is understandable that the Government wants to be careful,” he says, “but the public finances can afford this, it is not a pay deal for the austerity era”.

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