Surveys find public sector workers are better paid

Public sector pay and benefits are markedly superior to those in the private sector, even allowing for differences between the two workforces

THE DIFFERENCE in pay and working conditions between the public and private sectors is one of the most vexed issues in society and bears directly on any consideration of today’s industrial action by public sector unions.

The view of employers’ groups and many economists is that public sector wages are out of line and need to be seriously trimmed. The size of this “haircut” should take into account the more favourable working conditions and pensions public sector workers enjoy, it is argued.

The public sector unions point to the pension levy their members have already paid and claim that analyses of the pay differential between public and private sector fail to take into account differences in the make-up of the respective workforces. A belief that public sector workers have been or will be singled out for unfair cuts explains why so many are taking industrial action today.

So what are the relative pay levels in the public and private sectors? Most of the information comes from the Central Statistics Office (CSO), in particular its regular National Employment Surveys. Researchers at the Economic and Social Research Institute (ESRI) have also produced reports which attempt to explain the pay gap.

What the figures show consistently is that public sector earnings are higher than private sector earnings and have been so since the first round of public sector benchmarking in 2002. Both the CSO and the ESRI put the gap at about 20 per cent, after variations in age and qualifications are taken into account.

Some observers have claimed further analysis and adjustment is needed. Most civil servants work in Dublin, where wages are higher, it is pointed out. Others have questioned whether the data captures the true level of bonuses and perks available to high wage earners in the private sector.

Over half of all public sector employees have third-level qualifications, compared to less than one-third of private sector workers. In the public sector, many workers qualify for extra allowances based on their qualifications, but private sector workers are more likely to be assessed on the basis of performance than educational attainment. Workers in the private sector also tend to be younger – one-fifth are under 25, compared to less than 8 per cent in the public sector. This too could have a bearing on wages.

Analysis of the issue generally assumes that pay cuts have been pushed through for most private sector workers. However, this may be a journalistic misreading of the situation driven by the current problems of the media industry, where pay cuts have been widespread.

In contrast, surveys show that pay cuts in the rest of the private sector appear to be the exception rather than the rule for those still in employment. The Irish Times Ireland Today survey last week found that almost 70 per cent of people had not suffered a pay cut.

A survey of senior managers conducted by the Chartered Institute of Personnel and Development and Deloitte found that just one-quarter of respondents had implemented cuts in pay in the previous six months. Another piece of research by business consultancy Watson Wyatt found that 26 per cent of firms had cut pay.

CSO figures published last Friday show that in the industrial sector, hourly earnings including bonuses actually rose 4.2 per cent in the year to June. It was only in the financial sector that earnings fell, by 11.9 per cent. However, the figures show that even here, core earnings rose slightly and the fall in overall earnings was caused by a collapse in bonuses.

A pay freeze applies across the public sector, of course, where gross incomes dropped an average of 7.5 per cent with the introduction of the pension levy.

Earlier increases were still working their way through the system when the CSO published its most recent figures last month. These show that average weekly earnings in the public sector (excluding health) grew by 3.2 per cent in the year to June. Where wages fell in some sectors – by 3.1 per cent, for example, among An Garda Síochána – this was because of less overtime. These figures did not take account of the pension levy.

The differences: pay, pensions and holidays

PAY

According to the CSO, the raw gap in average hourly earnings between the public sector and the private sector was 47.6 per cent in October 2007. The gap in weekly earnings was calculated at 32.6 per cent.

These figures do not take account of variations in the characteristics of employees in both sectors, such as their level of education, gender or experience. With these factors, the pay gap was found to be 19.1 per cent in favour of the public sector: 14.8 per cent for males and 22.9 per cent for females.

The gap is biggest among low- earners and generally decreases as earnings increase. For the lowest earning 10 per cent, the gap was 25.7 per cent while for the top 10 per cent of earners, it was just 5.8 per cent.

The ESRI looked at pay trends in the period between 2003 and 2006 and found that the "premium" for working in the public sector rose over this period from 9.7 per cent to 21.6 per cent. Researchers added that this estimate was conservative as it did not take into account later pay awards.

The gap was estimated at 8 per cent at senior level and between 22 and 31 per cent among lower grades. For women, the public sector pay premium increased from 5 to 23 per cent over the period, while for men it moved from 14 per cent to 21 per cent.

The gap is at its lowest in the Civil Service and local authorities and highest in education, especially the third-level sector. Gardaí and prison officers enjoyed a high premium, while Army workers earn less than private sector equivalents.

It should also be remembered that workers in semi-States such as the ESB or RTÉ were not subject to the pension levy, and ESB staff were paid the last phase of the last national pay deal.

PENSIONS

Public sector workers enjoy defined benefit schemes which increase in line with salary after retirement and many can retire early on pension. Entitlements vary depending on whether the person started work before or after April 1995 but in general, public service pensions are markedly better than those on offer in the private sector.

The 2007 benchmarking report found there were "significant differences" in pension provision between the public sector and the private sector; this gap has probably widened since as the problems of private pension funds continue to mount. This report estimated the higher cost of public service pensions as 12 per cent of salary for the grades covered by the benchmarking process.

The McCarthy report noted a number of "added years" arrangements. For example, gardaí are free to retire on full pension at the age of 50 (an effective 10 years of added service), teachers with 35 years' service can retire from 55 on and a High Court judge can get 25 years added.

WORKING TIME/HOLIDAYS

CSO figures put the average working week at 32.7 hours in the public sector and 35 hours in the private sector, while the 2007 benchmarking report put it at 39 hours in the private sector and 35-39 hours in the public sector.

The latter report also found that holiday entitlement was higher in the public service, with the gap widest for higher grades.

Public servants, once they have completed their probationary period, generally enjoy permanent employment unless they break the conditions of this employment.

The last benchmarking report opted not to take account of this security of tenure, given the full employment that pertained at the time. This is clearly not an argument that holds water now.