I’m almost reluctant to write about this topic because of the level of hysteria that it provokes. Still, we cannot deny that a national public sector strike is an important topic worthy of debate on this blog.
My overall reaction is that the debate about public sector pay is descending, perhaps predictably, into a damaging battle between vested interests. There is much to dislike on both sides of the debate.
On the one hand, we have the trade unions. SIPTU state that the purpose of the strike is to “protest against government plans to enforce pay and pension cuts in the December budget.”
However, the government has not yet introduced its budget so this is a pre-emptive strike, to coin an unfortunate phrase. SIPTU are referring to the government’s plans to cut the public sector pay bill by €1.3 billion in the upcoming budget. These cuts may or may not include the pay and pension cuts to which the SIPTU statement refers.
Indeed, some trade union leaders have argued that these cuts can be achieved without pay reductions. The Irish Times recently reported Impact General Secretary as follows:
Asked if he thought it was possible to find the €1.3 billion being sought by Government without having pay cuts, Mr McLoone said he believed this was possible if all sectors engaged with the challenge “to see if we can maintain services at the same level while reducing costs”.
In practice, the easiest way to maintain current service levels would be to maintain employment but at reduced wages. However, this is probably the least-preferred outcome for union leaders paid to protect the pay and conditions of their workers. They would most likely prefer to see employment reductions via redundancies and hiring freezes.
One could argue that the strike would be justified if discussions between the unions and the government on how to achieve cost savings have broken down. However, that does not appear to be the case. A government press release from three days ago states that in a meeting with ICTU:
the Taoiseach conveyed formally his deep disappointment that strike action in the public service is taking place next Tuesday especially as efforts to find a basis of agreement about managing the public service pay cost in this unprecedented economic crisis are continuing.
With discussions ongoing, it’s hard to see the strike as anything other than muscle flexing by union leaders to get the government to back off its plan to reduce the pay bill by €1.3 billion.
Unfortunately, the state of the public finances (an Exchequer deficit of €22.7 billion in the year to October) means that adjustments in both spending and taxation are necessary. And the public sector pay bill cannot be immune to these adjustments, strikes or no strikes.
On the other hand, much of the rhetoric coming from those who wish to cut public sector pay achieves little other than insulting public sector workers. For instance, on last night’s Frontline program—which specialises in divisive public versus private sector debates—Eilis Quinlan, the Chairman of ISME, stated that she wished to “correct the misperception that there has been a pay cut” and argued that public sector workers were receiving something in return for their pension levy.
For public sector workers, who have seen their take-home pay cut without any corresponding increase in pension entitlements, these statements are deeply disheartening. It’s bad enough to have your pay cut—and a reduction in take-home pay without receiving in anything return is undoubtedly a pay cut—regularly hearing in the media that it hasn’t been just makes it worse.
The issue of incorporating pension entitlements when assessing public sector compensation is a perfectly reasonable issue for debate but the no-pay-cut line of rhetoric (which I’ve heard before from George Lee and Marc Coleman) does not constitute a useful contribution to this debate.
More generally, there are many who, upon hearing about a study showing an x% public sector pay premium, enthusiastically recommend that public sector pay should be cut by x%. While I also believe public sector pay needs to cut, I think those recommending this need to be conscious of the level of commitments that many public sector workers have taken on.
Prior to 2007, many of these public sector employees were encouraged by banks to take on huge mortgages backed by safe jobs with steady pay increases thought to be guaranteed. That reality has not materialised and the difference between what public sector workers expected to be earning in 2009 and what they are actually earning is undoubtedly stark enough that many of these people—particularly those with recently purchased houses and young children—are already suffering financial problems.
I guess my bottom line here is that the public sector pay bill needs to be cut, that maintenance of service levels implies that much of this cut should be the form of lower wage rates, but that this should not be something to be gleeful about. Certainly, if pay cuts in the December budget take the form of a further increase in the pension levy, I would strongly recommend that certain economic commentators give up on the claims that public sector pay has not been cut.