Public servants want their ‘stolen’ money back. Time for a reality check

It’s trade-union conference season, and there is, it appears, a competition to see who can express the most outrage about the pace of restoration of public-sector pay. The Government has been told it must “pay up”, that it must return “what was taken away” by cuts – and by late last week the talk was of the return of money that had been “stolen” from public servants.

The debate is still being driven by the concept of pay "restoration", ignoring the fact that the jump in pay during the boom was one of the reasons we got into such trouble in the first place. It is all part of the long prelim to the talks that will start once the Public Service Pay Commission has reported; it is doing key preparatory work, comparing existing pay levels with those in the private sector and in other countries.

There is a need for a reality check here. The country was bust, so public pay was cut. In the private sector tens of thousands of people lost their jobs, and pension entitlements for many have been shredded. In the recovery some – but only some – in the private sector are doing well.

Public servants, who did take a significant hit, are now benefiting from some pay restoration and the return of normal increments, the rises linked to seniority. Public servants deserve a mechanism for determining pay rises, but the issue is the basis on which this is established.

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Unions use the spin that their members are uniquely hard done by and that the sky will fall in if nothing is done about it

Like the farmers, the builders and various other lobbies, the unions use the spin that their members are uniquely hard done by and that the sky will fall in if nothing is done about it. Any criticism of their approach is portrayed as driving a wedge between public- and private-sector employees, even though demands to pull the bulk of spare State resources into higher pay for their members is doing precisely this. The pay rises they’re demanding leave little room for tax cuts – which benefit everyone in work – and risk crowding out further badly needed State investment.

The Government is facing the reality of the compromises made to get the cuts through in the first place, in the teeth of the crisis. First, they were made under “emergency” legislation. This allows the case to be made that the emergency is over and that pay should be “restored”. The second compromise was that part of the deal was to disadvantage new recruits by paying them less, particularly in areas such as teaching, or by giving them smaller pensions. Having signed up to this to protect their older members in the crisis, the unions are now calling for everyone to be paid the same.

The third issue is that, to delay actually doing something, the Government last year agreed to the classic tactic of setting up a committee to consider what to do. So it established the Public Service Pay Commission. This gave it cover to delay further action for a period. But now the commission is due to report.

Few topics are more contentious than comparing public- and private-sector pay, a key job for the commission. Consider that the headline from a recent CSO report was that there is a 5 per cent premium in the public sector. Davy Stockbrokers found that public servants were, in headline terms, paid 40 per cent more.

That public servants tend to be older, more experienced and more qualified explains some of the differential. Even allowing for these factors, the facts are disputed. Davy put the differential, after adjusting for seniority and experience, at 20 per cent. The CSO’s 5 per cent figure has attracted some controversy, as it uses trade-union membership as one of the explanations for pay levels. As most trade-union members are in the public sector anyway, this lowered the CSO’s measured figure of the public-private differential.

It will be interesting to see where the commission lands on this. The differential has fallen since before the crisis but still looks significant. The twist is that the differential, in terms of pay, now exists mainly for low- and middle-income earners. At higher levels public servants are paid roughly the same or a bit less, depending on whose figures you believe.

A private-sector worker could need a pension pot of more than €500,000 to match an average public-sector pension

But this is before you consider pensions, which Minister for Public Expenditure Paschal Donohoe has said must be part of the calculation. Davy calculates that a typical private-sector worker would need a pension pot of more than €500,000 to match an average public-sector pension. And more established public servants, particularly at the highest levels, have huge pension entitlements.

The unions say that any mention of pensions shows a beggar-my-neighbour attitude and that they will fight to protect entitlements. But these have to be considered in any fair public-private comparison.

We are stuck in the mantra of restoration as a starting point. Any moves to increase productivity, or build in the necessary flexibility on pay trends to take account of the economic cycle, are likely to be on the back burner. If the negotiations start from the position that the money was stolen in the first place, then the only issue is how quickly it all gets paid back. And in a shaky political set-up the unions have the opportunity to divide and conquer the political factions that must support any vote in the Dáil.

Paschal Donohoe has warned that this must not end up being solved by a messy political compromise, as happened with water charges. But that is exactly where we are heading.