SIPTU vs ESRI on public-private pay differential

SIPTU’s Manus O’Riordan (head of research) has put on his wellies and waded through the recent CSO releases on wages and employment to argue that the media fixation with large double-digit wage differences between public and private sector workers is not warranted.  He has several points.

First (and with similar argument to a recent post of mine at A Fistful of Euros), that as far as private sector jobs are concerned, the closer your job was to wearing a suit, the better you did both over the last 5 years and in particular since the recession began.  The apparent “failure” of the data to show wage cuts is a lot to do with the composition of workers (at least where the CSO has data) shifting towards the suits as lower wage workers lost their jobs.  And by comparison with managers, public sector workers have not done that well, and with the pension levy included, the recent trajectory looks much closer to that of manual workers.

So a few points for discussion.  Most of the discussion is done in terms of rates of change of various wages since some past year (usually 2005).  That tells us nothing about the level of wages in the various jobs, which is what much of the argument is about.   His Table 1 (page 26) does present information on wage levels, and from it we see that public sector wages are in between manual (lower) and managerial (higher) pay.

But the public sector itself contains a huge variety of job descriptions, some of which are essentially manual and some of which are managerial.  Without knowing the levels by grade within the public sector, we can’t say much but it’s possible that the traditional public sector wage structure with an inclination for averaging was indeed a relatively good deal for “manual” grades within the public sector and not so much for the quasi-managerial jobs.  In any event, we now know that manual jobs in the private sector have fared badly — wage cuts and severe job losses.  So of course that makes the similar jobs in the public sector look even better, pension levy or not.

Another point Manus makes is that the high level of immigration from the EU accession states led to significant downward pressure on private sector wages, which made the gap with the public sector look even larger.  But isn’t that pretty much the definition of a sheltered sector: increased competition comes to the country, but they can’t compete with one particular sector?  Again, wage trends alone only tell part of the story.

Back now to the question of the pension levy.  By making a 7 percent adjustment to all the public sector wage lines, the paper is able to make big inroads on the supposed wage gap between the public and private sectors.  But the obvious question is: if the pension levy is just a pay cut, why wasn’t it done as a pay cut?  The answer is that the unions have gone to extraordinary lengths to protect the public sector pay scales, which suggests they view the scales as a pretty good deal — the link to pensions in particular is critical.  When private sector pay gets cut, that’s the entire time path of income taking a hit, because the ability to save for retirement is also affected.  But the ironically named pension levy left public pensions unaffected.  And the higher your public sector pay, the better a deal that is.

Which raises a more general issue.  SIPTU rightly argues that the public vs private row has been used as a diversion from the issue of low paid vs high paid, regardless of sector.  But that means that even within the public sector, there are grounds for conflict.  There’ve been hints of this in the race to label’s one job as “frontline” but so far the unions have held their lines.   With some strange cost-saving proposals emerging (e.g. US style “furloughs”) and elements of the Green-FF budget debate being played out via leak to the newspapers, the tensions are not far below the surface.