WHEN THE Economic and Social Research Institute (ESRI) suggests the Government should look for a cut in public sector pay to protect services, its advice reflects an economic crisis and a 20 per cent wage differential between the public and private sectors. The ESRI is not given to union-bashing or to inflammatory statements. Its forecasting record has been good. So, when it expects private sector pay levels to fall in 2009 and suggests that, rather than reduce services further, public servants should also be asked to accept a wage cut, it will find an audience.
Taoiseach Brian Cowen faces a difficult problem. He has looked for help from the social partners in charting a way out of the present recession and, so far, they have responded positively. The Framework for Sustainable Economic Renewal, published yesterday, does not confront the central issues of competitiveness and unruly Government finances with the vigour and clarity they deserve. They are certainly mentioned. Many times. But necessary reforms and outcomes are left for future negotiation. In that context, the ESRI has performed an important public service by clarifying what is urgently required.
The framework for renewal is a patchwork document, pointing the way forward towards a "smart economy". But it provides no magic bullet and anticipates that growth will not return to the economy for at least three years. The initiatives it proposes, in terms of funding job-intensive activities in construction while preparing for an upturn in the global economy, make sense. The same holds true for its focus on the development of renewable energy systems and the provision of €500 million in financial incentives for new technologies. An increase in taxation is mooted, along with wage moderation and a reduction in costs for business. Decisions in relation to transport and electricity are given timeframes. And it concludes that anticipated borrowing levels are neither sensible nor sustainable.
It goes without saying that we must pull together if we are to get through this recession with a minimum amount of social and economic damage. The Government must confront its spending problems as a matter of urgency. A 20 per cent gap between comparative wage levels in the public and private sectors cannot be sustained if economic competitiveness is to be re-established. While that wage advantage exists, the public finances will act as a drag on growth and eventual recovery.
Social solidarity is the most effective way of protecting jobs and of shortening the recession. Everybody should be expected to make sacrifices and pull their weight. We are in a deteriorating economic situation. An estimated 117,000 people will lose their jobs next year, driving the unemployment level above 9 per cent. Government debt will have doubled between 2007 and 2009. And there will be a dramatic fall in industrial output.
In a situation where the cost of living is expected to fall by 2 per cent, however, there should be room for the Government and the social partners to reopen discussions on the wage front.