Irish Public Service 2001-2006: Salaries up 59%; Payroll up 18%

Irish
Irish Public Service 2001-2006: Salaries up 59%; Payroll up 18% - 38,000 workers and Pensions up 81.3%
By Finfacts Team
Jun 29, 2006, 08:27

Irish public service salaries have risen by 59% in the past five years and the payroll has expanded by 38,000 extra staff.

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Increases in public sector over the period due to general rounds total €2,479m (or 24.3%), “special” pay increases (primarily Benchmarking) total €1,328m (or 13%), and other factors (such as extra numbers) total €2,193m (or 21.6%).

The increase in the average industrial wage for a male worker in the period 2001-2005, was 19%.

The Exchequer’s annual wages and pensions bill increased sharply from €10.2 billion in 2001 to €16.2bn last year, with what has been termed "benchmarking" accounting for up to €1.32bn of the rise.

The number of public servants grew by 38,760, or 18%, since 2001 to 257,013 last January.

The education sector saw the biggest increase with pay costs rising by 65%. Health sector pay surged by 63% in the period, civil service salaries rose 48% and in the security sector they rose by 34.8%.

The average weekly earnings for non-health service public sector workers stood at €848 last September, according to the CSO.

This was above the €754 for the banking and insurance sector and €579 for industrial workers.

Fine Gael finance spokesman Richard Bruton insisted taxpayers were not getting value for money.

“Salaries have increased greatly, but there has been no quid pro quo for the taxpayer because ministers did not build the necessary reforms into the benchmarking structure,” he said.

and Labour’s spokeswoman on finance Joan Burton called for benchmarking to be much more transparent.

“I really don’t think we are seeing the money showing up on the frontline of health and education in particular. The bloated bureaucracy is swallowing so much up,” she said.

Public sector pay rose by 8% in 2005 and pensions now account for 10% of the total pay bill, up from 8.6% in 2001. The pensions bill has increased from €876m in 2001 to €1,588m in 2006 representing an 81.3% increase over the period. The increase in the health sector has been 104%. Pensioners also received the special benchmarking increase of an average of 9%.

The Department of Finance’s recent review of the Sustaining Progress and benchmarking initiatives found they had “contributed to the virtual absence of industrial disputes and disruptions in the public service”.

“It has also been particularly successful in securing commitment to co-operation with flexibility, ongoing change and implementing a modernisation agenda from the groups covered by the parallel benchmarking exercise,” the report stated.

Download report.

Benchmarking

An average special pay increase of 9% has been awarded to politicians, public servants and pensioners. Aspirational targets have been introduced in public services but there is no evidence of any improvement whatsoever in accountability.

In the public service, the opportunity to link responsibility with accountability was flunked with a sham benchmarking system. The recent national partnership deal has provided for some public service reforms including a removal of the ban on outsourcing "core work" but these are essentially baby steps.

Irish public service workers come from the same gene pool as those who work for the world class companies that power our economy. However, senior managers can sign-off on multi-million euro projects without having to take any responsibility for it.

In December 2000, a Public Service Benchmarking Body, established under the Programme for Prosperity and Fairness (PPF), was asked to undertake a fundamental examination of the pay of public service employees vis-a-vis the private sector. Former Davy Stockbrokers' economist Jim O'Leary was a member of the body for a period but he resigned before it reported.

In 2004, O'Leary who had joined the Department of Economics at Maynooth University, published with two of his colleagues, the results of six months' rigorous and painstaking research into public-private sector pay differentials in Ireland - Public-Private Wage Differentials in Ireland, G.Boyle, R.McElligott and J.O'Leary, ESRI Quarterly Economic Commentary, Summer 2004.

O'Leary and his colleagues wanted to discover whether similar people in similar employment circumstances were better or worse off working in the public than in the private sector. In order to do this, they had to control for attributes like age, experience, gender and education, and also for job characteristics like occupation, type of contract and size of establishment.

As the CSO data does not permit this kind of analysis, the dataset that they had to use is one based on a large-scale survey conducted by the Economic and Social Research Institute (ESRI) and used for much of its research into poverty and inequality.

The core finding was that on average, public servants earned 13 per cent more than their private sector counterparts on a like-for-like basis in 2001. The researchers also discovered that the size of this margin (the public sector premium) in 2001 was not significantly different from what it had been in 1994, suggesting that pay increases in the public sector had kept pace with the private sector throughout the Celtic Tiger period.

Another discovery was that the margin by which public service workers outearned their private sector counterparts tended to be significantly larger at the bottom of the income distribution than at the top.

A particularly striking finding was that the estimate of the public sector premium for Ireland was more than twice as large as the available estimates for other countries.

The Public Sector Benchmarking Body recommended pay increases which averaged 9 per cent across the grades examined and cost €1.2 billion a year. Government Departments introduced aspirational targets for staff that would make a laughing stock of a manager in the private sector who emulated the farcical exercise.

O'Leary says that the Public Sector Benchmarking Body never published its research results and at no stage in its 278-page report did it explicitly state or opine that public sector pay had fallen behind that in the private sector.

Ministers, other politicians and all living former employees of the Irish public service received special payments.

Last November, Davy Stockbrokers said that Irish public sector pay is on average around 120 percent of private sector earnings, having risen from 113 percent in the past five years, according to Davy Stockbrokers.

In a weekly market comment, Davy said that figures from the CSO (Central Statistics Office) indicated that average earnings in the public sector are now more than €43,000 a year. This compares with €33,500 in the private sector (industrial, construction, distribution and other sectors).

"Moreover, these crude comparisons take no account of the superior pension entitlements available to the public sector," Chief Economist Robbie Kelleher said.

The benchmarking awards have widened the gap significantly even though these were supposed to help the public sector catch up.