Half-truths about public service and pay serve us ill


Several universally acknowledged truths that are not really true at all dominate the financial crisis debate, writes FINTAN O'TOOLE

IN WHAT passes for public debate around the pay talks and the crisis in government finances, two truths are universally acknowledged. One is that, as Enda Kenny put it at the weekend, the public sector is "bloated" and "inefficient". The other is that wages generally are too high and are rising faster than those of our competitors. As usual, when truths are universally acknowledged, they are not really true at all.

The notion of the "bloated" public service is typical of those things that people "know" to be true, regardless of the evidence. It simply doesn't matter that the Organisation for Economic Co-operation and Development pointed out earlier this year that public spending is actually lower in proportion to the size of the economy than it was a decade ago, and that "government policy therefore has actually decreased the total number of public sector employees as a percentage of the labour force and decreased the overall public sector wage bill as a percentage of GDP".

Why does this information simply fail to register among so much of the political class and so many commentators on public policy? Because the idea of a "bloated" public service absolves politicians themselves of responsibility. We can solve problems by sacking all the supposed wasters. We don't have to acknowledge that "inefficient" and "bloated" are not the same thing.

The public service is inefficient, not because it's too big, but because it's so badly run. And it's badly run largely because of a political leadership with a myopic approach to long-term thinking, a love of "catch-all" policies that try to give something to everyone in the audience, poor standards of accountability and an addiction to half-baked schemes like decentralisation and the Health Service Executive that make bad systems worse. Since solving those problems requires a profound change in the political culture, it's easier to spout nonsense about the "bloated" public sector.

The second cliche is that we've lost the run of ourselves altogether when it comes to wages. Again, this is a useful belief insofar as it implies that the problems of the economy were caused by ordinary workers and can thus be solved by them. And again, it doesn't hold much water. Almost a fifth of all employees earn less than €10 an hour, and half of all employees earn between €10 and €20. Anyone who has to live on those wages knows that the first group is barely getting by and the second is doing okay but with little to spare. The problem, of course, is that the vast bulk of people who get to pontificate about wage levels in newspapers, in the Dáil or on the airwaves are not in this half of the workforce.

Okay, the pontificators will say, but we are still paying ourselves more than other economies. The truth is actually more complicated than that. Ireland is, or has been, a rapidly developing economy, quite different from the mature economies of most of western Europe. We're about halfway between the "old" Europe of the West and the "new" Europe of the East - a western economy that's still playing catch-up. And our wage patterns have mirrored this situation pretty accurately.

A recent report by the European Industrial Relations Observatory classifies 28 countries in four bands for real wage rises between 2003 and 2007 - very high, high, medium, low and zero. I'd lay a bet that if you asked most Irish people, subjected as they are to so much one-sided analysis, to place Ireland in this ranking, the bulk of the answers would be "very high" or "high". Actually, the right answer is "medium". We're in a group with the UK (our biggest single trading partner), Finland, Greece and Sweden that's higher than most of the old EU15 states and much lower than most of the new member states.

Pay rose by 4.8 per cent in Ireland in 2007. In the new member states it rose by 12 per cent, and in the EU 27 as a whole by 7 per cent. Adjusted for inflation, the pay rise in the EU as a whole was 2.3 per cent. In Ireland, it was 1.3 per cent.

This holds good even in specific sectors that are important to the Irish economy. In chemicals, for example, wages in Latvia rose by 30 per cent in 2007; in Poland by 10.5 per cent; in Ireland by 4.8 per cent. Even in the "bloated" Civil Service, wages in Ireland rose by 3.3 per cent. In the EU as a whole the figure is 6.2 per cent, and in the new member states it's twice that.

The point of challenging these cliches is not to suggest that we don't have tough choices to make. It's actually to say that the problems we face are far more profound than the cliches imply.

We're deluding ourselves if we think we can get to grips with the big changes that are happening around us by firing some public servants and making life harder for badly paid workers. We need a fundamental reappraisal of where we are and where we're going. We could start by not relying on hackneyed half-truths.