The Economic and Social Research Institute (ESRI) has said there is no justification for a new benchmarking study of public sector pay, in view of the fact that remuneration there is already significantly ahead of the private sector.
It clearly feels that another politically motivated exercise, designed to buy industrial peace at the expense of private sector workers, would cause serious damage to competitiveness and to our economic prospects. The message is blunt and unambiguous and the Government must pay attention.
There are difficulties involved. The current national pay agreement provides for a benchmarking review in 2005, to be completed by 2007. Unilateral abrogation of that undertaking by the Government would damage the prospect of trade union agreement on the final phase of "Sustaining Progress". At the same time, because public servants are paid more than their private sector counterparts it may be in their own interests to avoid the exercise. The situation is likely to be complicated by the work of the Review Body on Higher Remuneration in the Public Sector, due to report soon on the pay of judges, politicians and senior civil and public servants. Its last report, in 2000, recommended increases of up to 33 per cent, on top of national pay awards, and that largesse almost certainly influenced the work of the benchmarking body.
The climate of the time was very different, reflecting the apogee of the Tiger economy, strong Government revenues and a particularly militant teaching sector. Senator Joe O'Toole, a former general secretary of the INTO, famously likened the benchmarking process to an ATM machine. The body later recommended an average increase of almost 9 per cent for public servants, based on a perceived difficulty in recruiting staff and an imbalance in rates of pay. The ESRI has faulted that exercise as lacking in transparency. And it published research showing that public sector pay led the private sector by as much as 13 per cent in 2001, before the special increases were granted.
There has always been a strong suspicion that the benchmarking process was politically driven, designed to buy industrial peace in an over-heating economy. Its cost at the time amounted to an increase of 3 per cent in personal taxation rates. Since then, income tax bands have been frozen in successive budgets and public spending has been sharply curtailed. As a consequence, private sector workers have seen their standards of living fall. In future, special pay awards at all levels of government and the public service must be fully justified and transparent. Further cosy arrangements cannot be tolerated.