Former Bertie Ahern Seanad appointee, Eoghan Harris, writes in the Sunday Independent today that he is confused that I can believe public sector pay should be cut and yet also believe that his newspaper has demonised this issue. His silly comments about academics and the Irish Times aren’t worth responding to but I’m happy to clarify what my position is.
In relation to public sector pay, one can argue until the cows come home about whether public sector workers in Ireland are paid more than private sector comparators or comparable public sector workers in other countries, and about how these premia have been altered by the pay cuts of the past few years. However, that debate doesn’t change the fact that Ireland has a very large budget deficit and every major component of expenditure will need to be cut to put the public finances back on an even keel. And that must include public pay.
I’m sceptical about whether an approach that doesn’t see pay rates cut can deliver substantial savings and would also prefer pay cuts to reductions in numbers of front-line workers that will affect the delivery of key public services. So my position is that public sector pay rates need to be cut.
If that’s my position, then what’s my problem with the Sunday Independent? My problem is its focus on high rates of public sector pay as the single cause of the budget deficit. Its coverage repeatedly gives the impression that “we are borrowing to pay for the public sector”. Other areas of spending such as welfare rates receive comparatively little coverage and topics such as our narrow tax base and generous income tax exemptions receive no coverage at all.
An examination of the figures reveals that a focus on public sector pay as the source of the deficit is misplaced. This year, the government will spend €18.1 billion on pay and pensions for the public sector. The general government deficit is projected to be €15.6 billion.
You might think this means we can eliminate the deficit via an 86 percent cut (0.86=15.6/18.1) in public sector pay. But, even if you did manage to get anyone in the public sector to work for 14 percent of their current salary, this strategy still would not work because public servants pay PAYE, PRSI and a pension levy and most of these payments would have disappeared. (They also pay VAT when they spend their salaries.)
I don’t believe the government releases figures on the net cost of the public sector pay and pensions, subtracting taxes and levies, but I would be surprised if it was more than €11 billion. So you could fire every public servant in the country and still not close the deficit.
Back in the realms of reality, even substantial cuts in pay rates will still leave a yawning deficit. For example, consider a cut of 25 percent in pay rate, reducing gross pay by €4.5 billion. The marginal tax rate on public pay rates above €36,000 is 62 percent. (See tax calculator here) so the deficit would only be reduced about one-third of the amounts cut for people on salaries above this level. I suspect the net reduction in the deficit, before accounting for reduced VAT revenues, would be less than half of the gross amount, i.e. somewhere below €2.25 billion.
So, sadly, if the enormous deficit is to be closed, then other categories have to be looked at. These include spending on social payments (which will cost €26.8 billion this year and are largely exempt from income tax), on capital programmes (which will cost €6.1 billion this year) and on the narrowness of our tax base.
The idea that public sector pay is the source of the deficit has a satisfying ring for many. It means that an identifiable group of “other people” is responsible for all our problems. And it allows people to think that the pain of all the spending cuts and tax increases they are being hit with is unnecessary and is only occurring because public servants are being protected: Nothing sells newspapers quite as effectively as rage. I suspect the commenters on this blog have well above the average level of economic literacy and I can tell from repeated comments that many of them believe the deficit is solely due to high rates of public sector pay. Unfortunately, the arithmetic doesn’t support this position.
So that’s why I dislike the Sindo’s coverage of public sector pay. It leads its readers to believe that there is a simple single bullet solution to the deficit and, via that logic, to a demonisation of a particular group as the cause of our problems. Ultimately, this kind of coverage is unhelpful because it undermines public support for the additional measures that need to be taken, over and above public sector pay cuts, if the public finances are to be stabilised.
No doubt Eoghan would still diagnose my position as being down to status anxiety twitch or some other mysterious condition but I’m happy to take a few shots from the Sindo if the result is a more informed debate about the options for closing the deficit.
181 replies on “Public Pay and the Sindo”
Sorry Karl, that is way too subtle (apparently).
[…] “Former Bertie-Ahern-appointed senator Eoghan Harris writes in the Sunday Independent today that he is confused that I can believe public sector pay should be cut and yet also believe that his newspaper has demonised this issue. His silly comments about academics and the Irish Times aren’t worth responding to but I’m happy to clarify what my position is …” (more) […]
Perfectly reasonable Karl. Two points: An Bord Snip recommended a new benchmarking exercise, including explicit comparisons of PS pay with the UK and other countries. The across-the-board cuts formulae adopted to date make sense only if you think that all PS grades and occupations are uniformly ‘overpaid’. There is plenty of evidence which suggests that this is not the case and there may well be categories, including non-established staff, who are not particularly overpaid at all.
Second point concerns pensions. Most private sector funded schemes will likely prove unable to meet pension promises, not just because of poor investment returns (and the bizarre new tax on these schemes) but also because of longevity. The relative superiority of PS schemes is rising, in other words, and we have a two-tier system of retirement income provision to go with the two-tier health service. The fuse on this particular time-bomb has been shortened by the fiscal crisis.
Why did you force me to read all that cr*p?
Don’t be too sensitive. The Sindo seems to specialise in airing a wide range of views including even sensible voices like those of Colm McCarthy.
Gene Kerrigan is an out and out old world leftie who believes that public service pay (at least below 100K) should not be touched. The editorial line is unremittingly anti austerity and anti German.
I meant the cr*p from Harris, not your own contribution.
Will the “explicit comparisons of PS pay with the UK and other countries” use PPPs, or will we just engage in the typical Irish exercise of converting one figure into another (at today’s exchange rates and taking no account of relative differences in the cost of living) and then howling with outrage?
It is never a pleasure reading Harris but one has to admit it is pretty funny that one of Ireland’s premier exponents of chippy self regard can accuse anyone else of suffering from status anxiety.
To deviate further from the topic when was the last time Harris said anything that was not disingenuous reactionary rubbish?
There are a lot more cuts needed, that 3 years into our crisis, the rent allowance is most definitely creating an artificial floor on the residential market is insane.
Certain departments still spend Capital Budget as though they feel obliged to…etc etc
On public pay: the ESRI reports do confirm it was the lower paid who got the greatest increases, this was vote buying by one B Ahern, and will need to be reversed….and there’s still widespread denial about this….even though wre’re broke, and similar private sector pay is way lower.
I would think that some people at least understand that there are many hands in the public purse.
Lawyers getting half a billion annually from the State; the ex-factory gate costs of drugs bill was €1bn in 2008 and €600m was added to it by the middlemen; health insurance is effectively a tax and high fees for consultants paid by insurance companies are a levy on the public and so on.
As for public pay and reform, the OECD was requested in Jan 2007 to review the public service and propose reforms; almost 5 years later, little appears to have been achieved and last year Kieran Mulvey said the Croke Park process was taking the scenic route.
From the perspective of the private sector, with much of it without occupational pensions as part of public policy; basic redundancy and little prospect of work, the public guarantee of employment and a slow motion process of reform, suggests a very unequal society.
I appreciate the point but I think you might be attaching too much importance to Eoghan Harris’ weekly social diary.
Chest cold or not Harris was always able to sing for his supper. Whether in support of the Sindo’s rants on public sector pay or on stamp duty reductions or his senatorial grace a vous interventions to save Bertie’s neck.
The facts are as you describe them in relation to the quantum of the deficit versus PS payroll cuts.
Another issue that has got very weak coverage is the continuing tax breaks, particularly pension tax breaks.
Even the much touted reduction to a ceiling limit of 115K is not really all it seems.
A well paid retiree (banker for eg, or Secretary General) can put way in excess of that amount into his pension, with the excess rolling forward to give or her tax relief all the way to eternity.
“I don’t believe the government releases figures on the net cost of the public sector pay and pensions, subtracting taxes and levies, but I would be surprised if it was more than €11 billion.”
Here the DoF does publish figures called “Net Public Sector Pay and Pensions Bill”.
Althought, given it is 18.5bn in 2009 (versus a gross of 19.9bn) I assume it is not net in the sense hoped.
Eoin Harris is a cartoon character and a even bigger Dork then myself – its best to not even engage.
The fiscal thingy is merely a financial metric , not a reality – stuff goes in to pay stuff going out.
The economy is being run and always has been run in the interests of powerful men not as a real live independent entity.
I think Diarmaid O flynn deserves much praise to call the bullshit for what it is and also for actually doing something real if not very successfully to highlight this silent assault on us stupid Micks.
Maybe its time for Cork & Munster (you can have North Tipp) to break away from the Pales cold dead hand.
If the Goverment of this country had any honour they should resign en mass today and call a end to this rule by Robber Barons.
Maybe it will come down to the clans of north & west Cork saving your sorry tight asses again up there in a absurd town called Dublin.
Revolt is not a dirty word when you have Tyranny present in your house.
The numbers are part of it. But the Sindo gets traction with this not just because of the numbers but because of the pay-performance aspect. No one will shed a tear for the banksters, but the fact is that many of them suffered severe personal financial losses in the crash. They believed their own hype and were themselves invested in bank shares and property. But the people on the other side of the table — the senior civil servants, the regulators, and the supervisors, all walked away with promotions or retirements, with salaries and pensions intact. If these were senior executives at a company, we’d call that moral hazard.
Maybe the Dept of Finance should hire an outside expert, say a Canadian with IMF experience, who would examine how the Dept performed its personnel functions during the boom.
Wouldn’t take him seriously.
Who is Eoghan Harris?
I assume he is one of the many Irish journalists who have made a career out of projecting their psychological insecurities on to some ‘other’ i.e. Kevin Myers-women, John Waters-atheists, Eoghan Harris-the left.
Wasn’t he a judge on Glas Vegas or something..
Not that I ever watched it …. honest!
He was Bertie’s Incitatus
Nothing new 🙂
Well said Karl, while cutting public sector pay can help reduce the deficit, it is not the be all and end all to returning our public finances to sustainable levels. Welfare rates must also be cut and welfare programmes overhauled so they don’t promote dependence and are means-tested so they only go to the deserving. Tax rates also need to go up and the base widened. Other area of public expenditure like procurement and tendering costs also need to be reduced. Tax reliefs on things like pensions also need to be trimmed. Only by doing all of these things can we be certain to balance our books and return to the markets as a solvent and credible debtor.
Public sector salaries need to be cut by 50% and welfare and the raft of benefits need to be cut by another 50% for obvious reasons the primary one being we are bust. The tax net needs to be broadened and the people that caused the calamity must not be punished and not allowed to sit and draw down fat pensions and other entitlements. The private sector is rapidly running out of patience with all the various scams and all the variations on [NIMBY’ism’s] NIIMS NIIMP (not if it’s my salary, pension etc). The game is up!
Otherwise, someone can come on here and tell me how a state that takes in 33bn and is living on the most precarious of borrowing and which spends 21bn on Welfare, 14bn on health, 9bn on education and which will have to spend 8bn or 1:4 Euro’s raised by the state to servicing debt, end of 2013 is going to survive without further Bailout’s.
You haven’t read the post by Karl have you?
‘Status Anxiety Twitch’ is apparently rampant in Belfield at the mo; it is even worse in UCC; in fact it has reached epidemic proportions in all Irish third level institutes recently – bar one. Empirically this can be supported by the 13,567% increase in prescriptions for anti-anxiety and anti-depressant medications to the ‘status anxiety twitchers’ on the faculty of all such institutions in the past few weeks. Private health insurance has rocketed; students will fail to understand a single word spoken by … er .. [if not in Trinity, and you wish to continue reading, please take a little prof_envy_green_pill right now – then lie down for 30 mins before reading on] … LECTURERS (Ohoooo does it hurt that much?) in the upcoming academic year. Not too good for the deficit; and a disaster for the ‘knowledge economy’.
Karl – it could be worse; he might have called you a Platonist … take a leaf out of Sean Boylan’s book;
…. it is about high time you got off your Ar1setotalian high horse and write that modernist sequel to Souper Sullivan set in the Ciceronian confines of the Senate in The Age of the Gougers; The Rubber Bandits from Limerick will supply the Horse 😆
On substance of your post ~+1 But then again, you are Only a UCD Professor ….
I support your view that the cuts need to be wide ranging but a couple of questions emerge.
What sort of cuts to Public Sector salaries do you believe is necessary, if we assume the Croke Park deal is set aside? Appreciate that varying rates per grade need to be considered but what average are we talking about?
If the re benchmarking exercise as CMcC above suggests happens, me thinks the mortgage forgiveness debate moves to the next level i.e. those you can currently afford their monthly payement today may have a very different point of view if as a result of your estimated average cuts from the question above are more agressive than currently imagined. Don’t you think?
As a private sector employee who regularly visits public sector labs, I would look at this from another angle. Pay cuts is not really the answer but actual severe job cuts is required. Every single public sector industry I visit in my field is vastly overstaffed. This includes state labs, dept of agriculture labs, vetinary labs and hospital labs. The exisiting staff were under worked compared to a similar private sector industry and is an accepted point among staff. Most are taken directly from college and the system is in-grained into them at a very early stage to go with the flow in regards to lack of work ethic. This system has been handed down from previous generations and continues today.
The amount of work they can perform has collapsed due to budget contraints. In the private sector, many including my collegues lost their jobs when the costs of employees no longer made financial sense. The public sector remains untouched and a stroll through any public lab will find many with nothing to do. They would argue they want to work but budgets stop this, which has a truth to it. That same argument does not stack up in the private sector but is firmly belived in the public sector. Why is no cost analysis applied to the public sector and acted on by government departments. Staff cull is the fastest way to cut costs.
A major cull will not sort out costs of pensions or redundancy payments but it would go a long way in levelling the playing field for all and bring the various departments in to the real financial world.
There is absolutely zero chances that the budget will be balanced in 2013 ,therefore a new bail-out will be needed (if the EZ and the ECB survive until then).That is not necessarily such a bad thing,Ireland is in a much better shape than Greece.It might even be a good thing if outside forces can bring about reforms that are politically infeasible in the domestic context.
@Colm Mccarthy/ Yield
There are sensible and reasonable steps that could have been taken in PS pay without waiting for the outcome of benchmarking etc.
1. Cut the top three points of all scales that finish above say €60,000.
2. Cut top level pay to a max of €120,000
3. Freeze all increments above €40,000.
4. Pay all tribunal/other expenses on hours worked per a published ‘reasonable’ scale.
5. Tell the barrister who already earned €9 million from the tribunals and who gave an ultimatum to the government to pay him a concluding fee of €20,000, or he would not reduce his fee by 22%, that his fee is being reduced by 90%. [SBP today(Pat Leahy/John Burke)]. Imagine what Michael O’Leary would tell him!
There will be no buy-in to cutbacks etc while the first class carraiges are still dining on caviar.
I don’t really have a figure in mind for the right cut in public sector pay. I don’t have a good sense of how much is going to be saved from retirements but I do feel that it’s not going to be enough.
I understand the sensitivities of public servants and union leaders who feel they have taken substantial hits and yet continue to read and hear that they have not (the consistent quotation of CSO gross pay figures that include the pension levy must particularly rankle) and that the deficit is all their fault. This is particularly so when the state has taken on massive debts to bail out Anglo bondholders.
My ideal outcome here would be a negotiated solution with unions in which a pay rate cut is sold as an alternative to mass job cuts. I suspect that is too ambitious and my prediction is that there is likely to be trouble ahead on the public sector front.
Taxing & cutting the wrong things me thinks……………………………
Synthetic Tariffs ?
Cuts in PS pay could be taken if the general costs of living were reduced in tandem.
Thats unlikely to happen given the experience of health,education ,legal costs etc.
Therefore a consequence of lower pay for front line staff in all areas will be the temptation and maybe the necessity to take under the table payments for giving prompt or better service.This will increase inefficiency overall and will destroy completely the publics faith in the PS.
One possible reason a premium in PS pay and job security exists is to ensure fairness in the system which could be inefficient but at least be perceived to be fair and honest.
Personal experience in Greece has shown me the true costs of services are paid for under the table as bribes and if you cant afford to pay those bribes then tough.At least here in Ireland (for now) the system is largely fair and uncorrupted at the front line level.
That sounds a bit ominous.
Do they really need to cut pay when they really just need to increase the universal charge. I could be wrong but I think a 10% increase in thus could be the same as a 20% cut.
If they were to fiddle with tax bands, allowances and the USC (with a major rate for high earners) they could achieve savings equivalent to a pay cut of 20% over each year. This would also avoid union confrontation
“If they were to fiddle with tax bands, allowances and the USC (with a major rate for high earners) they could achieve savings equivalent to a pay cut of 20% over each year. This would also avoid union confrontation”
Unfortunately, it’s not a case of either\or. They may need to do both.
There is no ‘may’ about it.
“There is absolutely zero chances that the budget will be balanced in 2013 ”
Unless by that you mean it will be either in surplus or in deficit? Only using a standard model and factoring in current knows do you get to zero chance. The world doesn’t work that way. If Greece are forced to ‘voluntarily’ default, they may well have done with the euro. If they leave (and it is a bigger risk to us than a default), Portugal and Ireland may be pushed to be next, not least because there is a domestic audience that believe it would be a trivial matter to leave.
Leaving the euro, in at least some scenarios, would require a balanced budget.
Why don’t you give up Karl ? – the patient is bleeding because of very strange & dark bank obligations.
Theres little point in operating unless you can first stabilize the patient.
The classic way to deal with this is to both raise taxes and the money supply – cutting the money supply and raising taxes is a sick joke.
Let it go – any efficiencies will just keep the shadow bank sector going for just a little bit longer – it will not create a capital surplus to invest which is the very point of modern savings.
We will probably default when all of the shadow players are safe I guess.
Sickeningly predictable really.
Maybe its time to renounce the faith – you know its just balderdash , don’t you ?
PS What I meant to say was – social welfare must pay for itself. The social insurance system only really works if it does. It should not be topped up by general taxation – it should have a surplus to bring into a cyclical downturn. Otherwise the automatic stabiliser is going to cause a government solvency crisis every time it kicks in.
“Why don’t you give up Karl ?”
Honestly Dork, nobody knows what you’re talking about. Ever. Why don’t you give it up?
Do you propose another social welfare cut ? If so your solution is surreal in a country whose faith is sealed to the banks – social welfare spending is the most closed spending in the state.
You cannot divorce the fiscal stuff from credit until you actually get a real divorce.
Your savings would be artifical.
The patient is bleeding externally not internally – so therefore you stop the bleeding , and if you can’t you don’t stop the most effective plasma.
Imagine what would happen to shopkeepers who experience another drop in the money supply from a dole cut , how could they pay their private debt ?
When they default on their mortgages the debt will become sovergin……………………again….. because we are good little children.
What’s needed is a Dork Sanctuary. There is a precedent.
That link should be:
Cutting staff numbers during a recession is a very unpleasant business – – a first-hand experience I’ve had – – but it happens every day in the private sector or companies just collapse as hope of something turning up eventually evaporates.
With pay premia over equivalent private sector counterparts, and the earnings linked pension system in the public sector, what is the justification for the State guarantee of employment? It shouldn’t be justified as necessary to prevent corruption.
The HSE had to employ surplus managers from former health boards – – effectively being paid for doing no work; ‘better local government’ in the good old days established a new management tier. Across the country there are directors of housing and staff with little to do since the crash.
The State control of the banks has put the shedding of staff on slow-motion.
As Damien Walsh suggests, if people are on the ‘doss’ from day-to-day in an organisation, it impacts everyone else.
Besides direct pay in an unnecessary quango, there has to be a travel budget, maybe a PR budget, IT costs, office space etc.
How much of the €2.5bn annual science budget is welfare?
Sick leave at an average of 11 days is double the level in the private sector and has doubled since the 1980s; the C&AG reported that in 2007 average number of days that each employee was out sick ranged from almost five and a half days in the Department of the Taoiseach to nearly 16 days in the Property Registration Authority.
The percentage of staff who took sick leave ranged from 42% of staff in the Department of Arts, Sports and Tourism to 76.5% in the State Laboratory. Almost half of all sick days were taken by Clerical Officers and three quarters of all Clerical Officers availed of sick leave. The average number of days taken by each Clerical Officer was 16 days.
The Croke Park ‘process’ where every item of change has to be chewed over by a committee is a joke and who are the people implementing change from the top of the pyramid? — people who got fat during the good times and have no international experience of how a well-run public service operates.
Karl – for a former central banker you display a gross ignorance of money.
You recently said a term deposit is money – when it was nothing of the sort.
Its a loan to a bank.
You just cannot imagine money that is not debt – your thinking has ruined this country.
The current political problem is less to do with public sector wages, and more to do with the FF appointed senior civil servants bailling out with their ill-gotten benchmarking loot before they lose all their obscene retirement payoffs.
Once again, the generation and indeed the people who wrecked the country are riding off into the sunset with the loot. I don’t think there can be any national collective effort to reduce the deficit (including reducing public pay) without these people being tackled head on.
The government should just not pay them. Otherwise the public aren’t going to pay for the government.
@ Overseas commentator
I agree with you there are so many people educated, smart people departing for the black economy and many of them are doing it as a badge of honor because the government have lost all moral authority and respect. What with Croke Park, NAMA, raids on private pensions people feel betrayed.
Agreed, we will need bailout upon bailout and John Corrigan of the NTMA mentioned that friday. Most of our lads that come on here to give their erudite opinions will keep their fingers crossed, “hear no evil, see no evil and most of all, speak no evil” or reiterate no evil. They hope that they can avoid a 50% pay cut, a 40% cut even a 10% pay cut because they feel they have taken enough pain already.
Anyone who talks about cutting academic salaries always gets the silent persona non grata treatment. That is one of longest established rules of this blog, one that I am well aware of. That said, I have to admire Morgan Kelly and Dr. Edward Walsh the only two academics that have called it for what it is, a national emergency which requires sacrifice and leadership, rather than the “count me out, but here is my partial academic opinion”. A student of psychology would say that this is a defense mechanism and hardly surprising i.e. hide behind benchmarking, unions and Croke Park while preaching about rescuing the economy by any means possible except cuts to one’s own salary and conditions. That is precisely why we are in the mess we are in and because most of my friends work in these jobs I have to listen to it almost every day.
The acid test, if you require one would be to go to the UK and demand the same salaries there, you would be scoffed at and told, “sorry, this is not Ireland”. How did salaries get so out of kilter here? Two words “Bertie” and “Unions” and if you need an alternative explanation, try Michael D’s famous Dail speech where he witheringly says. “ye all sat on each others remuneration committees”.
I think the Sunday Indpendent is right to go on about public sector pay. You analysis of the numbers is perfect but you are ignoring the current political position.
Yes taxes will need to be raised, social welfare cut, and non pay spending cut. There is no dispute with this. The government is already planning on cutting these. These cuts will impact on people with very little disposable income and cause real hardship. The money extracted from poorer households will also have a greater impact on the economy because they spend almost all of their money within the domestic economy.
Compared to these cuts, cutting the pay of well paid pubic servants is low hanging fruit if your objective is to minimise suffering and importantly be fair. For every 1bn net cut in public sector pay you can avoid 1bn in tax rises or social transfer cuts.
The Sindo is therefore right to focus on the elephant in the room. We know the Government, Dept of finance, and wider public service are looking at all types of expenditure apart from their pay. With entire machinery of the state is firmly focused on how to extract the most from the wider economy.
In a crisis like this, any form of goverment expenditure that is not being examined is a legitimate target for journalists to highlight
One way to look at the situation is to estimate how long will the economy remain in a fragile state — 5 to 7 years at least? ; unemployment to remain high through the decade.
In the period 2001-2007, if the construction and related credit booms are set aside, there wasn’t much else booming.
There is no obvious engine of jobs growth now and absent a recovery in construction which impacts a large network of agents, a shallow recovery domestically would boost Tesco’s imports of food from the UK and Dunne Stores imports from China – – a simple example but realistic I think.
Bord Snip lifted many rocks and came up with over €5bn in savings.
The usually argument is that x or y proposal will not have a huge impact but add it all together if there is the will.
Greece again announced cuts in the salaries of public officials yesterday.
A Swedish MP’s basic pay is 27% lower than counterparts in Ireland; expenses are low compared with Ireland’s. In addition to the TD’s lavish expenses (including cash to buy lunch), each independent get over €200,000 tax free over a Dáil term (independent senators get 50%) without having to provide any detail on how it was spent. It is an outrage and dates back to 1997.
In Stockholm there’s no opportunity to pay off a property from expenses as there is in Dublin; taxes are also much higher.
Is it austerity to call a halt to this carry-on and much more?
“Anyone who talks about cutting academic salaries always gets the silent persona non grata treatment. That is one of longest established rules of this blog, one that I am well aware of.”
Karl is perfectly correct to challenge this nonsense head-on – particularly when he was named in this op-ed – and he is equally correct to highlight the economic illiteracy and public policy incoherence presented in these nasty witterings. But, for the rest of us, the requirement is to broaden the attack on the Indo’s editorial policy since the op-ed that justifiably annoyed Karl is but one manifestation of this overarching policy.
This demented focus on public sector pay, as Karl poiints out, ignores all other elements of public expenditure largesse and the narrowness of the tax base. Seamus Coffey recently provided data and information on state transfers:
It runs totally counter to common sense by expecting public sector workers to cheerfully accept swingeing cuts in pay and to then become super efficient and productive in the delivery of public services. This requires a well-structured and phased programme of reform that secures buy-in at all levels. (This, of course, does not imply that the current programme could not be pursued with more urgency.)
But most of all it ignores the ‘social welfare’ received by private sector bsuinesses and not only in the form of grant-aid, supports, ‘tax expenditures’, etc. As I commented on a previous thread:
“The amount of ’social welfare’ – both implict and explicit (and in deadweight costs imposed on final consumers) – provided by the state to businesses in developed economies probably swamps direct transfers to ordinary citizens.”
This is the most insidious and economy-damaging nonsense being perpetrated as it omposes excessive costs of most citiziens and final consumers, in increases the cost of living and depresses disposable incomes across the board.
But do you think the Indo would attack this? Not on your nelly. Public sector workers are a soft target.
Hogenmahew’s earlier comment “social welfare must pay for itself” is – IMO – the recipe for considering the whole of the deficit reduction problem.
Everything should pay for itself.
In other words, every job – be in public or private sector – produces a certain amount of marginal product, the value of which should exceed the remuneration paid to that resource.
If resources in the private sector are being overcompensated, increasing taxes is the appropriate solution.
If resources in the public sector are being overcompensated, decreasing public sector pay is the appropriate solution.
If resources are, however, underremunerated, the economy will lose them (nurses will just pack up and move to Toronto, where they can earn $90k Canadian a year and buy a nice house for $250k).
The good news is, if we get this balance right, there is ALWAYS AND BY DEFINITION enough money to pay for resources.
Granted, that’s not a small “if”, but at least it means there is a closed-form solution.
‘So that’s why I dislike the Sindo’s coverage of public sector pay. It leads its readers to believe that there is a simple single bullet solution to the deficit and, via that logic, to a demonsation of a particular group as the cause of our problems’
That is a net point, and a fair one in my view. As Colm McCarthy points out, the public sector is a varied landscape, where some employees are far from well off. Michael Hennigan makes some telling points about comparative international rates and calls once more for reform. Others posts back that up.
IMHO, the core problem is the debilitated state of our republic. Senior public servants, including university heads, have been allowed to develop lucrative personal fiefdoms. A spoils system. The grip which these ‘bureaupreneurs’ have had on high level recruitment and public sector procurement has enabled them to move smoothly into the elite circles of influence traditionally inhabited by our propertied and professional classes. Way too cozy.
This executive dominance, and accompanying governance vaccuum, has extended to the upper reaches of the unions, with a cascading series of cosy deals done under partnership to keep everyone sweet. One of the reasons ordinary PS employees aren’t stirring themselves, is the catastrophic decline in respect for management. The sweeties have run out.
Further cuts cannot but deepen cynicism and alienation, and may well lead, as mentioned above, to a culture of moonlighting and backhanders. Anyone who imagines that this can be ‘managed’ should read Michael Lipsky’s ‘Street Cormer Bureaucracy’. The bedrock of public service is personal responsibility. When that goes, look out below.
This problem goes way beyond fiscal issues. As Charles Moore said of Britain ‘we are morally and actually bankrupt’.
The challenge is one of reform. It doesn’t have to start at the top, but the top cannot expect to be exempted in the usual fashion.
Dork rightly condemns the financial takeover of the real economy, and identifies the self defeating nature of austerity programmes. Anyone who reads Steve Keen or Bill Mitchell, or has any familiarity with MMT, knows that orthodox economics has been going down a cul de sac. None of that takes away from your original point.
I’m sure there are areas of the public sector that are overstaffed (the HSE and the Dept. of Agriculture are often brought up in this regard), but there are also areas that are, or at least appear to be, understaffed. I remember ringing the PRTB to see about registering my brothers as tenants (it turns out I didn’t have to) and being told there was a six month backlog for new registrations. Now maybe PRTB staff are just lazy and can’t be bothered doing any work, but it seems more likely to me that there just weren’t enough of them.
In terms of the Courts Service, I think there’s been a drop in criminal cases coming before the District Court from a high in 2007/2008, but we’re not down to 2005 levels, and there have been substantial increases in pretty much every other category of case, so there’s not much scope for additional reductions here, and the workload in Social Welfare and Foreign Affairs has ballooned as a result of the recession.
I’m a bit surprised no one on this thread has referred to Jurgen Stark’s opinions on Irelands PS pay rates. Our multi-bailout future is most reliant on the likes of him…so I’d have thought we’d be paying more attention to what he thinks rather than Eoghan Harris’ latest ravings.
‘…It runs totally counter to common sense by expecting public sector workers to cheerfully accept swingeing cuts in pay and to then become super efficient and productive in the delivery of public services. This requires a well-structured and phased programme of reform that secures buy-in at all levels. (This, of course, does not imply that the current programme could not be pursued with more urgency.)..’
The answer to the above is not a phased programme of reform because quiet frankly I and many others have been listening to that speil for the past 20 years.
What is generally required is very basic – its better management.
I note that Michael O’Learys name was mentioned above can you honestly imagine MOL accepting the sick leave days as MH outlines above? I know I can’t. Can you honestly imagine MOL accepting the FAS retirement gig i.e. the phased goodbye? I know I can’t. Can you honestly imagine a mangager leaving Ryanair with a retirement package as we saw last week when Dermot McCarthy left the service? I know I can’t. I could go on, and on , and on.
This is not a public v private argument its a basic value for money risk return requirement. MOL and his ilk (that ilk is not at all the size that many believe it is) understand the value for money argument. My belief is for too many years the upper echelon in the Public Service forgot that basic rule – it’s a public service not a money making opportunity.
If you want to take your chances in the private world where opportunties can potentially deliver superior returns well there’s the door. It’s a risk return argument – the risks for working in the Service relative to the private world are generally lower (economically lower) and pay should ALWAYS reflect this.
Despite the headline , there are no quotes referring to PS pay in that in that IT article. Not a single one.
One quote refers in general to improving “downward wage flexibility in Irish employment contracts”. That’s as close as it comes.
Not just the Sindo that’s pursuing this agenda.
What is needed before passing judgement on these issues is properly-compiled and verified statistics relating to pay, performance, productivity, hours of work, results in each of the separate fields of education, health, law and order, transport etc.
Unfortunately, as with everything else, we don’t get this in the Irish media, merely gobsh*te jounalists spouting politically-motivated bullsh*t. For example, over the last few years those working in the health service have come in for especially heavy criticism and vilification by the Irish media, from the various ministers, HSE executives, all the way down to the doctors, nurses and paramedics. However, a few weeks ago a study by the University of Bournemouth found that between 1980 and 2005 Ireland was the most efficient country in the world at reducing mortality rates for each extra euro spent on health (link below).
We need similar studies on education, law and order, transport etc before reaching conclusions. Unfortunately, this isn’t the Irish media way.
Regarding this particular article, anyone who gets attacked in the same article as Conor Cruise O’Brien gets praised moves up several notches in my estimation.
If Michael O’Leary’s flying sweatshop is supposed to be a model of enlightened management, lord help us all. We’ve already got plenty of would-be Michael O’Learys with their 1980s (if not 1950s) business-inspired bullshit with all its right-sized synergies going forward. The fact is that large parts of the public sector are not businesses. They have (and depend on) an entirely different ethos (and, no, this shouldn’t include abuse of sick days by some). O’Leary-style “management by control” that doesn’t recognise the commitment of most PS workers would be a catastrophe.
You think Google and Apple crack the whip and underpay their staff à la RyanAir?
Apologies, i don’t think my link contains the full interview. AFAIK, his opinion could be summed up as “why should we do anything to help you, when you insist on paying PS and Welfare rates that are far higher than our own”.
By all accounts, he is fully up to speed on the workings of the irish state, so i can see how it would be a jaw dropper for him to see a (failed) civil servant retiring last week with a 550k golden handshake and a 140k pension for life.
A lot of people on here argue that ireland is not a pariah state because of how our banks behaved, they maintain that all banks in england, U.S and europe were just as bad. I would agree with this to some extent, i think what makes us a pariah in the eyes of other states is how we let the upper echelons of our public sector completely lose the run of themselves, and continue to do so.
Basically, retiring is a lotto win for many of them and retirement is one of the best paying jobs in the country. And this is all coming from money borrowed from other countries. I can well imagine the arched eyebrows Enda got when he requested a cut in the interest rate…and the subsequent teeth grinding when we had to be given one on the back of Greece’s meltdown.
I have been listening to Minister Joan Burton rail rightly against welfare fraud. She was talking about clawing back 2% maybe 3% out of a total budget of €20 billion. Worthwhile but surely a cap on the upper limit of welfare is desirable? The cap in the UK proposed in the last budget pulled rates back under the average industrial wage.
I also don’t know why private rent supplement is still pumped out at current rates given the price of residential property. Three/four bed in Dublin, currently the landlord receives at least €1000 per month off the state.
Reducing public sector pay rates will push even more people into mortgage default so it will be interesting to see how the government balances the equation.
I gave this example before: when the Single Payment System was introduced, an opportunity to redeploy or reduce the numbers in the Dept. of Agriculture was missed. Cutting numbers and having an tight recruitment ban seems a better long term strategy. There is too much duplication in the country – local authorities, third level institutes, agricultural offices, etc. The problem is that every interest group sees itself as special and deserving of a deal outside the door.
@Yields or Bust
I note that Michael O’Learys name was mentioned above can you honestly imagine MOL accepting the sick leave days as MH outlines above?
As someone who has had the pleasure of being around when Ryanair’s barely made plans do not quite work out I can not imagine a worse fate than having him in charge of services on which vulnerable people depend. The Michael O’Leary department of education would not be a good place for your special needs child to end up in the indifferent care of.
I am interested in the rates of private sector vs public sector absenteeism but lacking any more detail its difficult to tell whether this is the result of stress, age profiles, more exposure to illness or, as Mr Hennigan believes, bone idleness.
I am currently trying to complete my 2010 income tax and 2011 preliminary tax return. This will show that I have a massively increased tax bill to pay by mid-November due to the increased levies etc.
I have already paid a substantial amount of PAYE tax on my rapidly shrinking private pension fund. I don’t like this situation one bit, but this is the real world we live in and I have to go along with the situation if I wish to continue living in Ireland in 2011. I realise I am very lucky to have a nice home and not have to worry about putting food on the table or heating the house in the winter. But my plans to have a secure retirement income, medical service etc. are rapidly disappearing and are mainly outside my control at this stage of my life.
BUT – Why should I pay any more tax to fund the obscene payouts to retiring politicians and senior “public servants”? Why should I pay any more tax to pay the ongoing salaries and pensions of vastly overpaid senior “public servants”?
It’s not a question of how much would be saved by reductions in line with other countries to competitive levels of public sector pay – it’s the fact that until these adjustments are made our government will not have the moral authority to take any more tax from myself and many thousand others in similar situations.
It’s no excuse to argue that these amounts are due under contractual arrangements. The “contracts” were “negotiated” by two parties who were both beneficiaries at the expense of taxpayers. The employer cannot pay. Ireland is broke and yet continues to borrow to pay politicians and senior public servants pay and pensions and also welfare rates higher than those in the countries who are lending us money. This is a combination of Alice in Wonderland and Zimbabwean political economy!
Karl is absolutely right that cutting senior public sector pay will not solve our problems but until it is done how can we convince others to accept the cuts in welfare, pensions and increased taxes that are also required.
@ Shay Begorrah
16 days a year for clerical officers.
It’s definitely not stress anyway.
@Yields or Bust,
I take your point, but contributing to the setting off of one group in society against another is not helpful when some effective, equitable governance is required to get us out of this mess. And I also believe that some account must be taken of the government-authorised ‘largesse’ that the private sector enjoys. Much of this is often implicit and below the line; whereas any allegedly enjoyed by the PS is explicit and above the line.
Let’s have a look at the ESB which exists in a convenient no-man’s-land – it’s private when it came to pension levies, but is public in most other contexts – and whose workers’ pay has been the subject of concerted attack by the Indo. It is the ownership, structure and financing of the ESB – and not workers’ pay levels – that are imposing excessive costs on final consumers. However, the ESB (and BGE) has been successfully in its behind the scenes lobbying efforts to ensure that the detailed assessment of the electricity and gas sectors demanded by the Troika has drifted out to end-June 2012.
It’s very easy to construct this caricature of lazy, over-paid, risk averse PS workers, but it is a very useful ploy for many to distract attention from the state-authorised largesse they are enjoying.
Aren’t you the clever one – – ranting about the media and referencing a media report, not the original research.
Apart from the OECD which has a long tradition in producing comparative data, international comparisons are not always dependable.
In the case of benchmarking, research done by the CSO, the ESRI and economists at Maynooth, was rejected by parties who as the results were apparently inconvenient.
@ Ernie Ball
I would think that most private sector workers would not wish to work in a company like Ryanair, if they had a choice.
@ Shay Begorrah
As with the benchmarking studies, the research was done by public sector staff.
I wouldn’t say bone idleness; part of it can be because women may end up having to take care of a sick child rather than the father — poor management and so on. Simply, if people get away with it, they will take advantage.
I understand from a school principal, that it is not as easy as in the past to just claim stress as there are screening routines etc. I was told by a worker in a local authority that a colleague had spent 2 month on leave because of stress after her boss got angry with her about something.
Monday was the most popular day to be sick. The other key point was that absenteeism had doubled since the 1980s.
@ Paul Hunt
are you saying the ESB is a private sector company receiving govt largesse?
Personally, i would say it is a public company screwing the private sector, and the halving of capital spending over the last few years will tell you all you need to know about government contributions to the private sector. I dont see any other area of govt spending taking a hit like that.
Get real. Nobody suggested that large parts of the PS are businesses. What I’m merely suggesting is that significant savings can be brought about by improving the management of the PS. Normal work regimes are not fit for purpose in large swathes of the PS and this is neither a private or public argument, this is the plain fact. The point about MOL is that he and his management team at Ryanair represents the private equivalent of how an extremely well oiled private managment machine can best achieve value for money from scarce resources. The PS could learn a great deal if even 1/10 of what goes on in Ryanair were put to practice in the PS on a day to day basis.
No. It merely confirms Karl’s focus on the inaninity of the Indo’s one-eyed (and swivel-eyed) focus on PS pay by extending the argument to the semi-states. The relationship between Irish capitalism and the role of the state is profoundly dysfunctional, but most Irish economists rarely acknowledge this – not to mind begin to tackle it.
@ Paul hunt
Expanding the argument to encompass other elements and maintaining that the Sunday independent is too focussed on one issue does not make them wrong.
I too would not be overly happy to see a Ryanair equivalent running the education service – I’m not suggesting same. What I suggested above was that a significant problem has emerged over the past number of years where really poor management has allowed large parts of the PS to become unmanageable – if that makes sense. I’m suggesting that a Ryanair style management culture would simply not tolerate what went on for years. Nobody can argue otherwise.
Perhaps someone can explain to me what’s so wrong in demanding an almost fundamentalist focus on value for money in the PS.
It may be helpful to participants in this debate to look again at the 2001 Buckley Report and in particular Chapter 7 dealing with the fixed relationship to be established between the salaries of TD’s and, ipso facto, all elected politicians and the public sector.
If one is looking for the explanation of the totally unjustified – I would say near scandalous – inflation in senior public service salaries it is to be found there. It became a case of you scratch my back and I will scratch yours and we are living with the consequences ever since (and the scratching is still going on). TD’s are the representatives of the taxpayer and they cannot both run with the hare and hunt with the hounds although they have become adept at it.
On the issue of taxation etc., I find the line of argument advanced impossible to follow. Public servants have to pay their taxes as there cannot be discrimination between them and employees in the private sector. But the state is simply handing out income from overall tax revenues to public servants with one hand and taking some of it back in the form of a tax and social welfare contribution with the other. This is not the case with the private sector. If the state reduces salaries, it reduces expenditure. Hardly an earth-shaking conclusion
It is also necessary to address the issue of the justification for particular – especially transfer – expenditures. If someone can give me the justification for the levels of pay in the senior ranks of the public sector – academia included – I would love to hear it.
The shorter Michael Hennigan: Our, er, your society is unequal! Let us solve this by a race to the bottom, led by the state!
Utilities such as Ryanair create a false wealth effect – they increase the use of scarce resourses for sure but they do not direct enough revenue to aerospace companies so that they can create new technological capital.
A world full of Micheal o’Leary’s and not Howard Hughes leads to a net extraction of wealth over time.
Indeed companies such as Ryanair are industrial ecological dead ends.
The sad fact of the matter is that without massive investment from the military industrial complex Micheal would be offering risque hot air balloon flights across the Irish sea when the wind is favourable.
Memorable for sure but not very reliable for that 1 o clock meeting.
Wealth comes from technological development first – companies such as Ryanair will not save the world unfortunately.
They will just give a impression of apperent success as other companies fall faster then they do – eventually all will hit the ground.
No idea what you’re talking about, but it was yields or bust who brought up Ryanair, you can turn your fire on him.
No I was thinking about utilties in general and using Ryanair as the most extreme example of a decapitalise to create artifical profits stratergy – much like how the banks have created false profits over the years.
But you obviously never built airfix models when growing up – maybe all that glue affected my brain.
My compliments to Karl on his well balanced and perceptive post.
@ Tom Paine
“It’s no excuse to argue that these amounts are due under contractual arrangements. The “contracts” were “negotiated” by two parties who were both beneficiaries at the expense of taxpayers. The employer cannot pay. Ireland is broke and yet continues to borrow to pay politicians and senior public servants pay and pensions and also welfare rates higher than those in the countries who are lending us money.”
The country is not broke. Money is being lent to us from outside.
If and only if the external funding disappeared, then we would be broke, and maybe a “scaleback” of wages etc in the public sector and connected private sector (deloittes, accentures, PWC, lawyers etc etc) would take place.
But out bills are being paid…and this allows the status quo to remain in place.
Until this situation changes, the catharsis you are looking for will not happen.
I wonder if the moderators could have a word with Dork? His ramblings are as destabilising to threads as its possible to be. It would be helpful if dork you were to confine yourself to one incomprehensible intervention per thread?
Theres been worse than Dork here, but Phil has a point.
Can Mr Dork self govern on this?
I find the neo-liberal indoctrination present on this forum alien in the extreme – for instance nobody asks where does the new wealth come from when Ryanair cuts wages to increase profits.
Both will feed consumption – no end use capital creation will take place.
No new wealth comes from this shuffling of the labour / “capital” tables.
I will continue to point out the absurdity of the debate because it is absurd in the main.
Get over your monetarist belief that money has real value and maybe you will get half way there.
You have no idea what I believe, a view reciprocated. What I do believe is that you believe whatever it is you do believe very fervently. Great. But
a) none of us can understand your comments – thats not to say we wouldnt agree if you could explain in simple terms what it is you are on about
b) few appreciate the constant, incessent interjections of whatever it is you are on about
c) if you dont think money has real value, can I have yours?
d) I suspect most people would take your views more on board (assuming they could understand them) were they not pushed down our electronic throats every second post, regardless of the topic at hand.
OK I take your point that the country is not broke until the ATM’s are empty and this won’t happen until the ECB stops pumping money into Irish banks.
However if a lot of private sector taxpayers cannot pay their increased taxes in November even the ECB might have second thoughts?
Sure Phillip II – I will take your advice
I think I will give it a rest for a while…….
But I will finish with this – Money has no intrinsic value , it is just a symbol but the most important of symbols and in my now obsolete view it was the symbol of state at least to a limited extent under the sovergin state model.
When Karl lumps our money in with credit deposits he dilutes the power of this state to become a servent of the banks – they now have full control of the money concept………..
The actions of the last few years illustrates that all efforts to “save the system” was to save the central bank network and not the industrial end use ability of states to provide for its citizens – this is obvious even to a Dork.
Are you estimating that the average effective tax rate in the whole PS is about 39%
Wouldn’t that be considerably higher than the effective tax rate for the highest Decile of income earners of the general population?
I agree with your belief that the savings made from reductions in public sector numbers will be severely eaten into by their pension provisions.
The almost exponential growth in these numbers was shown in the report linked by Rob S.
Average Pensioner numbers 2005-72,024 2006-76,093 2007-86,780 2008-85,266 2009-95,122 2010-103,413
Reductions in pay rates are essential but will lead to industrial unrest.
@ Col Mccarthy
If we are going to benchmark I think we should bench mark against some of the Nordic and Central European countries rather than the UK who have
been following the lead of the US in the income inequality for the last 40 years.
I am not sure that the Dork makes complete sense but his postings are a useful corrective to the dour (and proven worthless) economic consensus that refuses to acknowledge that this is a crisis of capitalism requiring a fundamental change in the economic system and control of international finance.
Relatedly here is Krugman piece on economists failing to predict the consequences of the housing bubbles collapse in the US and the general funk in macroeconomics: “Why we failed.”
My best answer is that they were caught up in the spirit of the times, with its faith in the wisdom of markets and of the financial industry
When I read postings from professional economists on TIE, especially those involved in the current government’s approach, I rather feel that they are still caught up in those times.
It is a curious thing. We had a massive failure of the markets to efficiently allocate resources and a massive failure by the financial industry to evaluate risk.
However when asked what the real problem is almost every single Irish economist close to government answers it was really “Too much state and not enough market.”
It could drive a Dork mad, but it leaves me angry, disappointed and even a little surprised. Ireland’s “serious” economists appear to be good for little except explaining how a market failure means we need more market discipline, and a banking failure means we need to bend our states purpose to supporting them. Comforting the comfortable and afflicting the afflicted.
Well done all I suppose.
‘An Impeccable Disaster’ – Paul Krugman
‘Adding to the problem is the E.C.B.’s obsession with maintaining its “impeccable” record on price stability: at a time when Europe desperately needs a strong recovery, and modest inflation would actually be helpful, the bank has instead been tightening money, trying to head off inflation risks that exist only in its imagination.
And now it’s all coming to a head. We’re not talking about a crisis that will unfold over a year or two; this thing could come apart in a matter of days. And if it does, the whole world will suffer.
Despite the protestations of others I say under no circumstances should you desist from your posts. Just because others don’t understand your view is not a good enough reason for you to stop expressing it.
Like most things in life it demands that others try to understand and you explain your position in less floral style. I’ve no doubt a meeting of minds is somewhere in the middle.
Groupthink is always a dangerous pastime, let’s not go down that route.
There may be some characters who really believe that the apparent overpayment of many PS employees compared to the foreign competition is the sole cause of the state’s budgetary problems, but I don’t think there would be too many. I doubt the Sindo “believes” this either.
Karl says he believes many commentators here (no longer though dubbed actually economically illiterate) believe that high PS salaries are the only cause of the deficit. I haven’t read every comment on this blog, but I can’t actually recall anybody saying that. Lots of people concentrate on the topic and don’t include a footnote to indicate they are aware of other contributing factors. People who are touchy about it might want to think about the reasonsa PS pay gets such a lot of attention.
If the Irish football team found itself at the World Cup finals in a group where only one team would qualify, and the other teams were Australia, Scotland, Lithuania and Holland – which obstacle do you imagine the press and football pundits would spend a disproportionate amount of words discussing? The answer is obvious – and yet each game would only accrue the same number of points. Would the Dutch be right to feel demonised or victimised?
Too many economic pundits have drifted into the debate about the mess in Ireland – starting from their own chosen beliefs about economics and then getting pulled around by facts on the ground. Many have a Keynesian bent and saw a recession which required resistance to government cutbacks which would be counter-productive. It was irrelevant that PS salaries were out of line on the high side, they had to be protected otherwise the recession would be deepened. It was their duty, as non-neanderthal-card-carrying-Chicago-school-members to relax about the level of Irish PS pay.
What they seemed to miss was that although you might be able to do that as a bit part player in a currency union if you were dealing with a cyclical recession, you could not in a whopping great bust following a whopping great bubble – unless you could print your own money and let the market take your currency wherever it wanted.
Most foreign investors don’t really have much of a clue about how Ireland really works, its political parties, what they “stand for” (= who they stand for), how they interact with unions, social partnership, and all the rest. To most, it was a freshwater economics black box that proved that low taxes means economic success. A year ago they started to wake up to the real Ireland. The result was the possibility of a Keynesian response to an, in any case substantially non-cyclical downturn, was taken off the table. End of.
But where were we? The government had assumed, encouraged by bad advise that there was likely to be just a V-shaped recession, had merely taken the froth off PS payroll costs (yes we know it is quite a bit of money, but we also know it had risen dramatically during the boom) and then slammed the door shut on the option to ever do more via Croke Park *. This was to buy-off the PS unions to not cause industrial unrest. The idea was, hard sell on the cuts to the outside world, while being able to point out – look, no strikes!
The strategy failed, partly because the uncovering of the bank spoofing, focused too much daylight on the country.
If you can’t borrow the money to fund a carry-on-regardless policy you have to retrench. We Know the carers can easily be retrenched – they were first on the list. The bankers? They have contracts – and now the state has more genuine Euros to hand thanks to the “bailout”, it can jolly well honour the network of contracts that Patrick says define the country.
OK, the Labour Party are in the coalition, but we all know at the end of the day when the low-hanging options have been used up, welfare rates along with the stricter qualification rules that are currently planned, can be cut. The unemployed cannot go on strike, the disabled find it more difficult to do what the unemployed can do – demonstrate.
The power in the “me last” adjustment Ireland faces lies with the PS workers, and the authorities are cowed by them. If this does not change then the divisions within Irish society will become ridiculous. Colm McC is absolutely right to point out the gold-plated nature of the PS pension system which is to go on totally insulated from the real world that private sector provision has to contend with.
So the politicians, with one eye on all those PS and union influenced votes, and the other on the impression foreigners might get if there were strikes, are going to do the right thing, right?
What help or assistance in addressing this issue have they been given by Ireland’s opinion-former economists? The public has been treated to endless analysis of the payment of bank bonds, shortcomings of the ECB, German politicians – all of which I am happy to join in with. Where have all these economists been in the debate that would prepare the ground for a move to actually demand necessary cuts in PS pay – to allow the politicians to move on it?
The man on the street might have noticed the Sindo. Well that’s at least something. He would be unlikely to notice much from the academic economists to whom he has increasingly turned to for unbiased, balanced guidance. I have noticed sporadic comments from Colm McC, Brian L, very coded stuff the public won’t get from Phillip L, and having looked at that VB show – one from Karl along with probably a couple of others I can’t recall right now. Given that the situation has been obvious to economists for the last year, that is very thin gruel.
PS pay is going to be the toughest nut to crack and that is why it gets attention. You should not assume from that that people paying it attention therefore do not understand the economics. Maybe the debate would be less irritating to PS employees if a few more PS economists would stick their heads above the parapet and engage properly with it – by which I mean more than just pointing out how much pay has been cut since the ridiculous levels right at the peak.
* On Croke Park, this appeared in todays IT:
“JÜRGEN STARK seems like he hasn’t a care in the world. He is within hours of his resignation from the European Central Bank but gives nothing away, as he argues for cuts in Irish Civil Service pay to help bring the public finances under control.
This is toxic politically and would blow apart the Croke Park deal, which compels the Kenny administration not to cut public pay or make compulsory redundancies.”
Isn’t is telling that nobody is allowed to know that the Agreement does not compel the government in this way. It is a fiction everybody seems content to go along with. The paragraph (1.28) in the Agreement that states the government shall not implement it in situations like having to go to the IMF for a bailout is so studiously ignored by mainstream press, economists and politicians as to be comical. Is it any wonder people think the country is being run too much for the benefit of the PS?
Interesting stuff in this Reuters report, focused on education cuts
@Yields or Bust
‘Just because others don’t understand your view is not a good enough reason for you to stop expressing it.
p.s. Blind Biddy lookin forward to picking up that Monkey – Greece to stay in the Euro ALL this September [her Polaris in the Aegean will make sure of that] and beyond – but the sooner the 50% haircut the better – and the sooner we address our own vichy_banking issues. Are we prepared? Or has the Oirish Anxiety Twitch gone pandemic?
7_of_Nine reckons that the Dork ain’t human as he is much too logical; she is 99% certain that he is a Corkonian.
@Dork of Cork…
Please do not stop posting.
@ Ernie Ball
Race to the bottom – – what an interesting cliché in defence of the status quo.
The next cliché to use will be ‘class war’ as the defenders of inequality use in the US.
Did you not know that people eating from the same trough as you have promoted a policy for the private sector of having employer social security costs close to the American level of 6.2%; it would have some element of fairness if these insiders applied the same rules to themselves and people like you. The same people reduced corporate taxes from 40% to 12.5% for local business owners while leaving the workers facing pensioner poverty or being accosted at race meetings by a well-meaning staff member of the Pensions Board flogging a private pension, even at a time when they were still making losses, and the PB board member like yourself, was on a gilt-edged unfunded system.
Isn’t it strange that traditional trade unions find themselves in the same boat as the gougers among the professional class in the private sector, in resisting change.
There appears to be a tacit agreement between them not to interfere in their respective rackets.
Race to the bottom indeed.
@ Shay Begorrah
Where the balance in a mixed economy should be is a matter of argument and evidence.
What are you arguing for that Ireland should have more monopolies or near monopolies like the ESB and RTÉ where the public interest is invariably put first or a reversion to the Department of Posts and Telegraphs?
Or expect more of senior civil servants given their stellar record?
I dont mind Dork posting but communication is a two way street…
Wow. That must have been building up for some time 🙂
Your comments on the economists are perceptive. Even the few who have achieved a certain position that might render them reasonably safe from the wrath of the ‘powers-that-be’ pull their punches, speak in code or mention areas ripe for reform but find that unfortunately their expertise doesn’t extend to these areas (while those who have expertise remain silent or dissemble). Most are in thrall or beholden in some way to the government machine. Those who have not achieved a position of safety from the wrath of the ‘powers-that-be’ generally keep their heads down – their views expressed quietly, privately and sotto voce. And if they are in some way beholden to the government machine (or operate within it) and are required to make public utterances they will finely calibrate these to ensure only the revelation of the amount of truth that it is safe to reveal.
(It is interesting that it took an economic historian to break the omerta.)
The effect is to close down the debate and to leave the field open for the know-nothings, ranters, spin merchants and spoofers. If those who know fail to speak out the public interest is damaged. It is not for the general public to demand the presentation of the expertise required; they do not know – nor should they be expected to know – where it resides or precisely what expertise is required – even if they are paying for it.
It’s simply that too much resource and competence is monopolised by the government machine. If that’s the principal source of reward, prestige or the ability to influence, the silence is not surprising.
There are multiple problems from paying high (relative to Euro peers) public sector rates. Whether we can/could temporarily afford it is secondary from the market distortion effects.
But firstly I’d point out that high public pay say at the senior public service positions distances them from problems with people on average pay rates.
If everyone in a housing policy meeting was earning 10 times industrial wage how could they really understand that houses prices averages heading to 300k were ruinous. They may have been thinking that’s just one “good” salary. That’s why they came up with economically illiterate nonsense like affordable housing for people earning 50k+.
On more normal salary levels you’d the attractive pay/pension/holiday package attracting graduates into routine clerical roles. I know a few people in a local council – a nicer and but more ludicrously over qualified group you couldn’t hope to meet.
Anyone who knew leaving cert age children in the 2000s knew that there were two desired job types – on the building site for a quick buck – in the public sector for the long term buck. Not a formula for a sustainable economy.
And of course when tax is included any savings from public pay cuts are diminished. But you have to keep the two calculations separate as otherwise tax policy and public pay policy become tightly coupled. There are very good reasons governments show their employees pay in the accounts as if they were normal employers without taking into account they really only pay the net of tax figure
You make the most sensible of points these salaries (which are a significant part of the problem) can only be paid for by bailouts. The perceived injustices are doing as much damage as the overpayments themselves. That can be measured in consumer sentiment. Many people simply want the old system of entitlement and smugness to die on the vine. In any event the real damage was done by people on these salaries making disastrous errors which led to systemic failure of the banking system and regulatory authority. Let’s not overlook the fact also, that agreements negotiated, for and on our behalf, were carried out by state officials, who knew they would benefit directly if they caved in to union demands. To make matters worse many of the union leaders then decided to benchmark their own entitlements on what they were “negotiating”. So contrary to popular beliefs there are individuals in the “private sector” with public sector “entitlements” salaries and pensions, they are called top union executives.
Then there is the hidden time bomb. Pensions. Wait until the 130bn contingent liability for state pensions becomes more than a contingency starts to impose more and more disorder on our current budget deficit. The fun will really begin, as our EU and EZ partners take a closer look to see what is going on in dear old Ireland. In the real world, though, that will not be their concern as we will be left turning in the wind by then. At the moment, our success is being measured according to our ability to convince markets that we are tackling our problems. Hence the heroic efforts of ESRI etc. Herr, Stark’s comments are a flavor of what is to come. Nothing will change from within as you say until access to borrowing is cut off. That point is inexorably approaching.
Great post. Will reread and digest
@ paul quigley, and Shay Begorrah
Wogeously off-topic, but sort of influenced by the discussion about the Dork.
I’ve been concentrating recently on writing, and otherwise helping to create, small scale works for top actors to perform and, with luck, take on tour.
This year, amongst five in Dublin Fringe, I have one called ‘Last Year’ performed by Maeve McGrath.
I’ve taken the liberty of naming two of the characters ‘Shay’ and ‘quigley’ in your respective honours. I wouldn’t say you’d recognise yourselves in them – but I hope you enjoy the thought of a small possibility of artistic immortality.
I like this bit…
“That’s why they came up with economically illiterate nonsense like affordable housing for people earning 50k+.”
It highlights the madness and reminds me of the wage comparisons for Prime Ministers. Nestled at the top was our supreme glorious leader (see graphic http://www.ft.com/intl/cms/s/2/eee43b4e-1779-11de-8c9d-0000779fd2ac.html#axzz1Xkeu3hqj). From this article – “In October 2007, a mooted €38,000 increase in the salary of Irish Taoiseach Bertie Ahern, which would have taken it to €310,000, was deferred in the face of some outrage.” I guess (Irish-style) benchmarking justified that €38k and would have happened only for those pesky doom-mongers and Lehmans.
I think that you are on the money on this issue. Lots of us in the Private Sector are just plain p*ssed off and when you see the largesse doled out to Civil Servants, their mates the Politicians and their Associates in the Public Sector i.e. Local Authorities,ESB, Bord Gais,HSE,Universities etc well then most people have had enough and are going to refuse or avoid/evade paying for this lovely cabal who are busily looking after themselves. We have 4 Teachers in the most important economic posts in Government – Kenny, Noonan, Howlin and Burton and I like most others outside the cabal have no confidence that any of these will wield the knife to the CS/PS to bring some fairness back into our economic system.
The ultimate consequence of failure to deal with these issues will be the ongoing failure of our economy because most people just feel that what is going on is not fair and will proceed to withdraw from the “system”.
Tip of the hat to the grumpy one!
So far there has been little or no leadership from the top of our public sector. The austerity has been applied disproportionately light to those in the upper echelons.
For those at the top, bonuses have been rolled up into salaries to nullify any pay reductions. Official salaries often exclude a multitude of allowances and generous travel and subsistence. “Voluntary” pay cuts turn out to be excluded from retirement lump sums and pension calculations.
Given the lack of of public finances, all recommendations (since 2000) of the Review Body on Higher Remuneration in the Public Sector (Buckely reports etc) should be reversed. This should include pension payments which were/are linked to current post holders.
“You think Google and Apple crack the whip and underpay their staff à la RyanAir?”
Whatever about Google, where do you think Apple build their products? Do you really want to outsource large parts of the PS to China?
I’d like to emphasise that “Public Service” refers to people directly employed by the State.
“Public Sector” includes the “public service” and also the semi-states, like ESB, DAA, Dublin Port, Bord na gCon etc.
The phrases Public service and public sector are being used interchangeably when in fact they are very different groups. Public service pay was cut dramatically in recent years, but this has only had limited impact on public sector pay rates as many of the semi-states had no paycuts or indeed payrises (the ESB notably).
So please people know what you are speaking of. Much of what is written in this context is garbled because people are not distinguishing between these similar but different phrases.
Total public sector staff plus pensioners is about 505,000 with 53,000 in commercial bodies.
Obviously, the part of Apple that is comparable to the Public Service (if indeed it is) is the service part, which is in Cupertino. My point was that it is bad enough that morons want to apply inappropriate business models to the public service. They always seem to choose the worst sorts of business models and never the best, which are always more collegial.
It’s worse then that. Even economists like Morgan Kelly, who should be expected to know such things, confuse not just public service and public sector but think that all in the public service are “civil servants.”
Given former ECB Chief Economist J Stark’s comments reported in the Irish Times this morning would it be possible to start a new post on this topic.
If it is the ECB’s view that public sector pay levels are too high in Ireland, an on a par with Greece, what is the evidence for this.
Technically you are correct on the difference between Public Service and Public Sector but everyone knows that the ESB,Bord Gais,Eirgrid etc are just an extension of the Public Service. The best part for them is that they have all of the benefits of the Public Service plus salary/bonus increases and inflated expenses.
I know someone who works for Eirgrid and he earns his full official years salary at the half year stage because of bonuses, overtime and allowances. The average remuneration per employee for this company as set out in Com McCarthy’s Second Report are mind boggling at €96,900 in 2009.
“anyone who gets attacked in the same article as Conor Cruise O’Brien gets praised moves up several notches in my estimation.”
True enough +1
Admittedly I rarely read Harris’s narcissistic drivel – but his admiration of that arch Machiavellian CCOB borders on hero worship. But I would have thought that his praise of the other Machiavellian (Bertie) would have rated Karl another few nicks on your tally stick?
BTW – off topic of course but who thought it was a good idea to invite neo- Unionist Harris to do an oration at Liam Lynch’s grave? And he despicably labels of Florrie O’Donohue as sectarian terrorist.
Are you saying that a total of 558000 people are employees or pensioners of Irelands public sector? Approx 33% of voters in Ireland are in public and 66% in private sector? We also know that government spending is running at over 50% of GNP. Must have interesting implication for working of democracy in a democratic capitalist country.
I saw a comment that Greece is being piloried for having 25% of employment in its public sector.
Stark is yesterday’s man. It’s not clear that he speaks for anybody.
@ grumpy + 1
@ celebrity economist
“What is the evidence for this?” The evidence is this, Morgan Kelly the most prescient economist in the country has stated baldly that he is 100% overpaid. Dr. Edward Walsh wants his own pension to be cut and says that if we were to pay public sector workers in the republic, the same salaries as their counterpart in the UK or NI we would save 7.5bn annually! Between 2000 and 2010 we doubled public sector pay bill as well as adding an extra 100,000 jobs without increasing the efficiency of one single department. In fact, much of the work done by various government departments was handed over to Quango’s the most reliable estimate of same was 1008 by Dr, Niamh Hardiman of UCD. Whole government departments hollowed out as Colm McCarthy once remarked and yet the salaries just kept on increasing. Surely if you do less you should get paid less? Not in Ireland it seems.
If you click on the link posted by Ahura Mazda above you will see a nice little graphic showing Irelands then Taoiseach standing on a heap of money higher than the heap occupied by Angela Merkel and second only to Barak Obama. The head of the armed forces in Ireland earns more than the head of the armed forces in the UK which is a nuclear power. Last week Dermot McCarthy retired from the Taoiseach’s office with a package worth €700,000 and an annual pension of €143,000. He gets paid 63% of what Chancellor Angela Merkel earns for lying horizontally in his bed. Eddie Hobbs reckons that this pension is worth 6 million Euro to the recipient and Dermot McCarthy was one of the main “negotiators” looking after the tax payer’s interests during the benchmarking process.
I might add that when Bertie was being awarded €37,000 by an “independent’ group of public sector you scratch my back etc. The following day, the Irish Times asked 10 of the top unions in the country for their reaction. Not one of them said, “This is wrong” or “this is absurd”.
Very well argued piece. You captured the nuances of this issue very well. I am a PS worker but I realise that terms and conditions are completely out-of-line with the private sector. I also think you hit the nail on the head on another issue: for example, Special Needs Assistants have summarily had their hours reduced in many schools and there was no argument from BL (RIP) or Michael Noonan that, unlike the bankers, they had binding contracts and their pay could not be reduced.
I think that in a small country like Ireland very many economists keep one eye on the potential for lucrative State consultancy contracts, nominations to State Boards, etc. Remember that it will often be senior civil servants drawing up such lists or, at least, will have the opportunity to raise objections. It would be entirely rational, utility maximising behaviour to keep quiet on such issues as pay and conditions in the civil service and wider public sector.
I haven’t a clue most of the time what you’re talking about but I defend to the death (well maybe not that far) your right to say it.
The government, unbeknown to them and certainly not conceived by them, will take advantage of the Croke Park agreement to reform practices in the PS, hopefully whacking alot of them and their Jurassic practices. However, fortunately, the crisis will then require a severe pay cut anyway for the PS.
On this occasion a sequence of events will overwhelm the dark forces that seek to line the insiders pockets and give a 10-1 result for the little guy.
Chaos theorey will save us from our parasitic bretheren most venal efforts
My God, this blog is in danger of becoming the next Sindo itself. The amount of reactionary rubbish on it is impressive and growing. Apart from Michael Hennigan who has a long record to point to, I wonder how many of the commentators above gloried in the Celtic Tiger Bubble? How many bought into the housing hype? None huh?!?!? How many have actually changed their minds about anything over the past few years, and now instead of revision know rage that must be directed somewhere? And why pick somewhere sensible when there’s a public service to bash. Hell one commenter above even called us a Pariah state. Like WTF???
I wouldn’t agree with the Dork on everything and at times he can be a bit cryptic, but to be honest, he’s one of the few commentators that consistently looks to the core of the issue. What we’ve had is a financial system collapse in the western world. The only thing holding it together is government. This is not the fault of the public service, inefficient as it may often be. It is not the fault of even over paid public servants, which many undoubtedly and even outrageously are, and which by the way a much fairer way of dealing with that would be through the taxation system, but not many here ever espouse that – I guess because high paid private sector workers would have a net pay cut also, and how many in this parish would that effect? It is the fault of a failed paradigm, a system of thought that is not fit for purpose and yet is still espoused by many above including all the academics that post.
For a change, how about a post that actually looked at MMT, even with a critical eye. Or how about engaging with the work of Steve Keen. Instead we get a thread with 112 comments of which I can remember only one (other than the Dork) that mentioned the impact of cutting wages on personal debt. Without including that the rest of it is verbiage disguised as outrage. Sounds like the Sindo, and like the Sindo, it’s bad for your health.
Many thanks : )
I believe in the power of drama and the arts more generally. As Yeats knew well, art goes where rational beers don’t reach.
‘..the chase counts as much as the capture, if not more, and there is a profit of action that exceeds the profits explicitly pursued, wages, prizes, rewards, trophies, titles, and positions, and which consists in escaping indifference and is asserting oneself as an active agent, caught in and by the game, occupied, an inhabitant of the world inhabited by that world, projected towards ends and endowed – objectively and thus subjectively-
with a social mission’.
Pierre Bourdieu In Other Words Essays towards a reflexive sociology Polity Press 1990.
Look forward to the performance.
Is this what Nassim Taleb called his “Black Swan” event? Swans always seem to crop up again and again in our history.
Soros talked about the how an approach that once produced valid results (screwing willing government negotiators) becomes over exploited and overburdened to the point where it is no longer valid” and I might add, ‘advisable’. Soros, “called this his postulate of radical fallibility”.
As someone who studied industrial relations for 4 years, I could see that the unions were just as irresponsible with their members futures as Seanie and Fingleton were with their grasp of the principals of prudential banking. Any rational negotiator could have negotiated salary increases for the public sector that were both rational and sustainable. It is never about exploiting a fool who is only interested in power for a short number of years and who was always going to walk away to write his memoirs. For lower paid public sector workers those below 60K I could have negotiated a deal that did not allow your pocket to be picked, by your (in theory) more powerful trade union colleagues. However, you all preferred to buy into the Croke Park fantasy and are now being shuffled to the edge of a very steep cliff.
@Yield or Bust
“Groupthink is always a dangerous pastime”…
I like Eoghan Harris.
Dork is a Leeside jester, and a bit of a latter day brehon. Now and again there is a short circuit between the two ends of his brain, but mostly he is very good humoured and entertaining.
Steve Randy Waldman needs a bit of concentration, but he has a very high class line of chat on economic matters. Anyone who is wondering what the Dork is talking about might find this sort of thing useful
I suppose that includes you too Dork 🙂
@ErnieBall “Obviously, the part of Apple that is comparable to the Public Service (if indeed it is) is the service part, which is in Cupertino”
This is not comparable to the Irish public service. You possibly could draw comparisons to Apple’s HR section or customer service sections but anymore than that is daft.
If you think the Irish public service is doing the equivalent of cutting edge engineering, I can assure you from direct experience that in Cupertino these staff regularly work 80+ hours a week with a couple weeks holidays a year. Staff burn out is common.
While quite well paid for this – unless they’ve gotten slack recently they’re paid less than what workers for neighbouring companies get, they don’t need to pay very high rates as there’s plenty of new talent who’ll take a paycut to work for such a prestigious company.
Also as regards Jobs he was despite his charismatic stage performances famously a nightmare to work for – not exactly the union friendly chap you naively seem to believe.
Steve Jobs running the Irish public service would have been hilarious. He’d make Michael O’Leary look like Eamon Gilmore.
You wrote: he evidence is this, Morgan Kelly the most prescient economist in the country has stated baldly that he is 100% overpaid.
Well, it turns out the most prescient economist in the country is wrong about that.
@ Ernie Ball
Maybe Morgan knows what is coming down the line after all others had problems even imagining his calls on the economy and we are still getting closer to his predictions rather than further away from them.
He probably looked down the road saw the financial armageddon that we are facing and under those circumstances asked himself. What could I do personally to try and stave this off, Then came the “admission”. I am a 100% overpaid.
Does anyone in their heart of hearts really believe that we are coming out of this without civil strife that will culminate in a new paradigm shift?.
I would not underestimate what is happening and how few cards Ireland has to play, against the hawks like Jurgen Stark. 60K to 80K salaries might easily become the new norm for our “high flyers” in a country that is forced to get rid of its current account deficit overnight.
Sorry Ernie your blog is not weell referenced and you should declare any vested interest. Clearly international professors look in awe at their Irish under achievers
You have yet to advance a coherent argument as to why my pay should be reduced to a level below the minimum wage.
Do you mean the minimum wage in Poland? Cause that where we are headed in terms of wages
Unlike the Polish we cant afford your extradinarily expensive skill set, perhaps the Polish can
@ disgruntled observer
Well said that man/woman
Since when is an income that’s less than the average industrial wage ‘extradinarily expensive’?
Re initial post – well said KW
At least we didn’t spit at EH.
@ Kevin Walsh
Yes Kevin, as I said, “hear no evil, see no evil, talk not evil”. The day anyone will put forward the “coherent argument” for reducing your pay will not come from Robert Browne it will come from your own government telling you there is no more money to put in the ATM.
We hear a lot about this very malleable concept of “minimum wage” is it 35K or less or 45K or 50K?
I remember attending an event where Blair Horan of CPSU spoke. Blair likes to say his union represents the lowest paid workers in the public sector, the ones that must have their reductions restored from any Croke Park savings.
Blair exuded bonhomie as he regaled his audience with a little insight into the social partnership process. In 2002 he was at a meeting of the social partners in Dublin Castle. The union was looking for 600 million for his members. Bertie passed him coming out of Dublin Castel and says. “yis asked for 600m and I gave yis the 1.2bn” this was then divvied up! Well
Whatever your idea of minimum is, next time you go to your ATM to withdraw some of it think about the fact that 40% of it is borrowed money that must be paid back over the next 7.5 years.
As for Jurgen Stark he has the ear of the Chancellor and is one of the most influential figures in Germany. Do you think he chucked in the job and then rang Merkel?
@ Disgruntled observer
Of course “pariah” is too strong a word. We’re not north korea or anything, my limited vocabulary failed me there. I was trying to convey my belief that Ireland is now a deeply unpopular country amongst those EU nations who are currently lending us the funds to keep our gold plated ship afloat. I believe that whilst they may see the Greeks as lazy, feckless and corrupt…they see the Irish as deluded, greedy and wasteful. Retiring civil servants queuing up to collect their lotto winnings can only add to that image.
Robert Browne repeatedly hits the nail on the head, i think the constant sound of him connecting just irritates some people.
Afraid I don’t see what’s “not well referenced” in my blog post since I cited my source which, unlike the source you cited, actually has comparisons involving Ireland.
As for “international professors” I am one and can tell you that the standard of living I have in Ireland is significantly lower than that of my peers in North America or France or Germany even though their nominal wages are but a fraction of mine.
You know damn well that someone on a 40 hour work week on the minimum wage is getting under €20K a year. And the next time I go to the ATM to withdraw money I will be too preoccupied by the fact that in about a year’s time I’m going to start missing my mortgage repayments to worry about the state’s deficit, a deficit largely caused by a collapse in tax revenues.
“I was trying to convey my belief that Ireland is now a deeply unpopular country amongst those EU nations who are currently lending us the funds to keep our gold plated ship afloat. I believe that whilst they may see the Greeks as lazy, feckless and corrupt…they see the Irish as deluded, greedy and wasteful.”
So make an argument for progressive taxation where the marginal top tax rate is 90%. We’ll see what happens to the income distribution curve then. Instead there’s this constant refrain that it’s all about the public sector. If you’d read my comment, you’d understand I don’t see it that way. We’re in the middle of a global systemic crisis of which we are but one small part. And whether it’s imbalances between China and the US, or Germany and peripheral europe, we’re only in the first half of the game. Read Michael Pettis on where this is going.
And whilst you’re at it, make sure you also read down to his replies to some commenters. In particular about the issue of currencies and trade, which DO apply to Germany and peripheral europe.
I’d also add, that not all of us in Ireland are insecure enough to care so much about what other’s think. We’re not all self-haters here.
Oh, and one last thing. What disgruntles me is ignorance however eloquently expressed!
What are you arguing for that Ireland should have more monopolies or near monopolies like the ESB and RTÉ where the public interest is invariably put first or a reversion to the Department of Posts and Telegraphs?
Or expect more of senior civil servants given their stellar record?
You have me bang to rights Michael, yes on both counts. I think Ireland is too small for useful competition in some areas (lets call them “utilities”) and that an efficiently run state enterprise where longer term national goals can be prioritized over shareholder value are a better answer. Adam Smith is not my guy.
Where we might agree is that I do not believe that civil service positions should can combine the current guarantee of job security without an understanding that retraining and mandatory reassignment has to be a significant part of civil service life and that discipline, specifically the removal of under performing staff, has to be improved. What it means to be an Irish civil servant will have to change.
Of course this will not be easy, we love our fiefdoms and pretending that Ireland needs all the apparatus and structures of a modern European country when we only have the population of a medium sized city.
Delighted to hear that I have finally made it to the stage (by proxy), I will have to see Last Year to check whether Shay is a middle aged Trot suffering from early dementia or merely a yappy dog that walked on a keyboard in the nurses office.
@ disgruntled observer
Ignorant, insecure, self hater….mmm, dont hold back anyway, not sure why you feel the need to get abusive. I’m talking about what i think is the view of Ireland amongst those who are lending us billions…I think thats a reasonable topic for discussion and my opinion on it was based on assuming they are rational people and working it out from there. Thats all. No need to get personal. This thread is about PS pay levels, I understand perfectly well there are numerous other factors and imbalances involved, i was only giving an opinion on the subject at hand. Apologies if that disgruntled you further.
The Irish Public Service / Apple Cupertino equivalence has got to be one of the most surreal comparisons ever on this blog, and that takes some doing. Or perhaps the Irish Public Service embodies the values of a leadership council on one of those peace-loving planets in Star Trek, with long white-haired kindly men speaking deep truths. Both concepts seem to have about the same relationship with reality as I see it.
Apple has about 45-50k employees, and about 30k are retail. That leaves about 15-20k in Cupertino to do 100% of the R&D for all products, and marketing, finance and other HQ functions. On an annualized basis, Q3 2011 results show that Apple has revenues of over €80bn. So no more than 20,000 employees design and build products that have revenues of 50% of Ireland’s GDP. Apple is still in startup mode after 30 years, and is an incredibly lean and intense company. jackh has it exactly right above. Irish public sector workers wouldn’t know what hit them if Steve Jobs rode into town.
Apple is an extreme command and control organization, with different groups only knowing what they need to know. Google is very different, and has a much more bottom-up approach outside core search with successful side projects growing and morphing into sometimes huge successes (e.g. Android OS). Google runs on intense peer-pressure, rather than top down command and control. Again Irish public sector workers wouldn’t know what hit them if they were dropped into Google’s Mountain View environment, with a tremendous need to produce successful code/projects to keep peer respect, and ultimately, your job. So there are two very difference company cultures, but both share an unrelenting and extreme focus on productivity – hardly the defining characteristic of the Irish Public Service.
Or maybe Family Guy Stewie’s multiverse remote control isn’t just a cartoon creation and there are parallel realities.
You should nail that post to the the doors of the Dail Chamber and the doors of every academic economists’ staffroom in the country.
@ Bryan G,
Have Google or Apple employees ever had to walk into a burning building? Any of them ever been stabbed? Do you call them out to your house for an emergency?
Could you imagine a situation where a fireman called out to put out a fire in your neighbours home, so to protect yours, might be facing the loss of his own home. Bought during the bubble he had nothing to do with creating, saddled up with debts, told that on a risk/reward basis, his life is worth less than some Apple guys job so they cut his wages beyond his ability to service his debts. I suppose you could give him your iPhone. Hell, I was mightily impressed with the ESB guys who climbed the poles yesterday to fix the wires that allow iPhones to work. Some pressure in Hurricane Katya I can tell you. How many Apple guys have ever suffered a work related injury, other than RSI?
Ever lived in a country where the dogma espoused by many here is the dominant force. One without unions, without a sense of service, where the police have to moonlight as security guards for banks and jewellers, whilst wearing uniform, I might add, and at times engage in serious repression? There is no rule of law. Civil strife can become coups, and civil wars can develop. Everyone has bars on their windows. If the well off get into trouble, including kill someone, they can bribe their way out of it. This is where this all goes. This is where Greece is going. This is where we are going.
Now I’m not saying that Apple workers don’t work damn hard, and at least in a market sense create incredible value. But you know something, there’s something wrong with a system that values cheap flashy devices above utility and public service. I could live without Google, but you can bet your bottom dollar I want a fire service, and hospitals, and schools that can teach autistic kids, and that puts humans above toss away consumables.
But luckily there is a way to sort all that out. Do what they do in social democracies. Do what they did in the US for almost half a century. Tax wealth and high incomes properly. Flatten the income distribution. It’s not even revolutionary. It’s been done before. It does work.
Obviously,you didn’t understand the point I was making, preferring to use it as a pretext to show off some of what you learned in management classes. Colour me impressed.
Thought this pertinent, in the vein of disgruntled observer’s excellent post:
Perhaps you would care to enlighten me by clarifying the point you were trying to make. I don’t seem to be the only one that interprets your comments in this manner.
Also I know nothing of these ‘management classes’ of which you speak.
‘But you know something, there’s something wrong with a system that values cheap flashy devices above utility and public service’
+ 1. That is one of Dork’s fundamental points. We have embarked on a self defeating process of consumption/capital extraction. I am always amazed by the contrast between the intelligence which goes into IT products and the juvenile inanity or sheer pointlessness of many applications. A bit like the military. No wonder many IT users (and soldiers) have a difficulty getting a grip on the world.
Of course there is also something wrong with a public sector where the badge of leadership is filling ones boots. Our cosy insider elite is, IMHO, the main obstacle to any sort of recovery.
I think you and Jarlath, Robert Browne, Grumpy and many others are saying the same thing, but with different emphases.Reminds me of the end of that old film Network, where everyone leans out the upstairs windows and shouts ‘ I am mad as hell’.
I think you are arguing against a case few are making. Good public services are essential. However a system that protects under-performing insiders from being laid off, has no concept of pay-for-performance (e.g. Dermot McCarthy), has pensions that are in a different class to others, etc. can hardly be a solid foundation for providing those good public services.
They’re for managing to lose arguments gracefully. I don’t believe you need them…
@ Bryan G
I don’t see the point of bringing teachers and firemen into the discussion. You’re just fudging things by doing that, an old fianna fail tactic if i remember correctly. The republicans in America are fairly adept at it too. The issue that is provoking emails like Grumpys and Robert Brownes above is senior civil servants and politicians on 6 figure salaries and 6 figure pensions, far in excess of their counterparts in countries to which we are currently deeply indebted. Heads of semi state bodies being paid far more than they would receive elsewhere…its all been outlined above far more eloquently than i could manage.
Karls example in his piece of an 86% pay cut to elimanate the deficit was slightly childish and pointless, i dont think any right minded person solely blames the PS pay levels for our current deficit problem, or expects the solution for it to be found there. But the excesses at the top of the scale are without a doubt the number one first step for people when it comes to reducing this deficit. People are talking about austerity fatigue, nothing fatigues us more than hearing about the grotesque salaries and pensions being doled out of an empty public purse to a few failed yes men.
Here we go again, the firefighters, every time someone mentions public sector reform, we get the firefighters, here are some facts:
The fire service is operated at local level by 37 fire authorities. There are 220 fire stations throughout the country with 3,330 serving fire service personnel, of whom 1,185 are full-time and 2,145 are retained part time(on a 24 hour basis). as you can see a very small percentage of the overall public service numbers
Greater London with a population 7.7 million people has one chief fire officer (CFO) and 6 senior staff.
For the 6 counties of Munster with a population 1.1 million there are 10 CFOs, 20 senior assistant CFOs, 40 assistant CFOs and up to 20 assistant fire officers.
In Ireland there are 272 senior fire officers which translates to one senior manager for every 9 fire-fighters and the recommended ratio is 1-in-20. a case of an awful lot of Chiefs for a small amount of Indians
Fire chiefs are paid between €78,000 – €95,000.
The only sensible thing we have done in relation to Fire service is the 3 Regional Fire Control Centre’s in Castlebar Dublin and Limerick, though why they need a 4 wheel drive is beyond me, other than to go to the shop for a pint of milk and a packet of figrolls
Eoghan Harris and Karl Whelan might liven up next Monday night …
Topic: The Aesthetic Turn in Irish Economics
You’re right. The public service isn’t firefighters. It’s not guards or teachers or nurses or lecturers or prison guards or any of the other examples people might bring up. No, no: everyone knows that the public service is nothing but a bunch of bureaucrats who do nothing but laze around all day counting their money on their 5-hour lunch breaks.
OK, perhaps I chose my example poorly. Apple may not have the enlightened management structure I thought. It’s still a far cry from RyanAir. And my point remains: enlightened management in 2011 is not of the RyanAir type (or even the Apple type as this article (which was probably your source) makes plain. What’s exceptional management practice in the highest flying companies is precisely the sort of whipcracking management by control that many here advocate. Given the tasks that the public service is involved in (teaching and health care notably), such management by control (as opposed to management by the commitment of the workers themselves to the enterprise) would be entirely inappropriate.
“management by the commitment of the workers themselves to the enterprise”
I had to re-read that 3 or 4 times. mind boggling.
“such management by control (as opposed to management by the commitment of the workers themselves to the enterprise)”
Why is that mind-boggling? Finnish education system – ranked by PISA best in world, or John Lewis say?
Some pretty unedifying public sector bashing going on there folks, it might be an opportune time to think about why exactly you feel so much hostility towards people who chose to work for the country rather than for profit. Some psychological displacement from frustrated capitalists going on I suspect, Atlas cringed and all that.
It might be time to close the thread.
@ Paul Quigley et al.
Paul. In many respects, you’re absolutely right that I agree with a lot of what Bryan G, Grumpy, Jarlath, and many others are saying. However, I think the difference is more than just an emphasis.
We’ve had twenty years of tearing away at labour laws, loosening regulations, forcing an inevitable downward push in the private sector. Companies used to pay for health insurance and sick leave. Only the largest do now. Where in social democracies there is paid parental leave for both parents of newborns, here a mother’s not even entitled to her full pay. We have the least holidays in the EU, ie. the minimum we could get away with under EU law. Hell, we don’t even have the right to collective bargaining, in contravention of ILO treaties to which we are signitaries and over which the unions are now going to court. They say this is so we can be competitive and attract FDI, but most of the companies that come here via FDI actually are way better than that. This is all nothing but subsidising so called “entrepeneurs” in the indigenous private sector, which already have the lowest social insurance costs in the eurozone, and pay some of the lowest taxes. I would also add that wages in the private sector industries here are lower than the peers against which we are competing.
Now considering all these facts, and notwithstanding my abhorence at some of the salaries at the top of the public sector and my fatigue at hearing billionaires extolling the virtues of hair shirt austerity, I find it galling that the public service is incessantly singled out. Ernie Ball is correct. It is a race to the bottom that is being championed here. And just for the record, I don’t work for the public service.
We have had a collapse in revenues, part directly and partly indirectly for all the reasons listed above. And if the companies that operate in the private sector here can’t compete without all these state subsidies (and yes they’re subsidies), then the private sector managers here are equally grossly overpaid and incompetent as their supposed PS brethren.
There’s a very competent bunch of countries to the north-east of here, who understand the nature of a balanced system, a civil society, the requirement for investment in both real and human capital, but us in all our wisdom choose to ignore them. There’s a reflex here. It’s ideological, dogmatic, and virulent. I believe Krugman likened it to the Ebola virus. The Dork is correct. This merry go round is insane.
I agree that the hostility is totally unwarranted, but, rather than your speculation about psychological motivation, I would venture that much of the hostility is being generated by anger towards those at the higher levels of the ‘government machine’ who, yes, might have chosen to ‘work for the country’, but who failed seriously to protect the public interest and the interests of the country – coupled with the perception that those who remain in post and those who have left continue to be rewarded excessively for these failures.
Given that a majority of voters would perceive themselves to be in the private sector as opposed to the broader public sector (though the reality is much more nuanced than this), it may suit the Government to nurture a degree of this hostility – while, of course, maintaining a plausible deniability – as a means of securing popular support for the fiscal retrenchment our overlords demand.
It also serves as a means of distracting attention from the state-authorised ‘social welfare’ lavished on the semi-state and private sheltered sectors which is much more deserving of public hostility, but which governments will avoid tackling at all costs.
“management by the commitment of the workers themselves to the enterprise”
Correct me if i’m wrong, but is he not saying they should be left alone to manage themselves based on their sheer love and commitment to their professions?
“Where have all these economists been in the debate that would prepare the ground for a move to actually demand necessary cuts in PS pay – to allow the politicians to move on it?”
A few months ago there was a modest proposal to make some adjustment in academic research contracts. It was debated by the academics on this blog. I don’t recall all the details but on first reading the comments, I couldn’t for the life of me figure out what so so wrong with the proposal. It seemed pretty much a tailor made mandate from the Croke Park Agreement. Several commentators reacted as if the sky had fallen. Academics were not ‘public servants’, we were reminded.
It seems heresy to suggest that there are too many third level institutions, too many duplicate staff, and too little emerging to consolidate the aspirations of ‘knowledge economy’ policies. Is it really sensible to usher over 60% of leaving cert students through degree courses? A few years back I had two guys plastering for me with degrees in engineering from one of the Institutes. Was that a good use of taxpayers’ funds? Turn the institutions into private sector entities and test their viability – and irrespective of any number of OECD statistics, a country of four million people does not need 30 odd local authorities, enterprise boards, public offices, etc.
If costs have to be cut, they have to be cut in one’s own back yard too. That’s always the tricky bit.
No, what I’m saying is that when dealing with very highly-trained professionals (e.g., doctors, teachers, firefighters) who are committed to jobs that are multifaceted in the extreme, it is totally inappropriate to base management on the assumption that the work is like that in a cannery where nobody would do it at all if they weren’t a) paid; b) required to, and where “performance” (how many tins did you seal today?) is easily measured.
Take the introduction of “performance metrics” into such milieux. For these sorts of professionals, the introduction of such metrics does nothing to induce better performance of the job as a whole, but merely leads people to reapportion their time and attention, often in inappropriate ways. To take the example I know best: insisting that all lecturers produce “research” and measuring it, as they do, by counting (rather than, say, reading) publications results in the overproduction of such make-work to the detriment of teaching. It is to the detriment of research as well, for what is the incentive for anyone to take their time to think things through and produce something of quality when it counts for no more than the slapdash work of a colleague? If you respond that “doing quality work is its own reward and satisfying to the person doing it” then you will begin to understand why management by control is inimical to the fields (like education, like health care, like firefighting) where “doing quality work” is people’s real motivation.
That said, I am entirely in agreement (and as angry as anyone here) that the PS has been swamped by layer upon layer of unnecessary management, precisely with the aim of implementing the counterproductive management by control demanded by Jarlath and others. Not surprisingly, these are the people making the huge salaries and contributing virtually nothing of value: think of the management layers in education (particularly third level) and health, both of which have exploded in size and cost and whose main purpose is to implement “efficiencies” that their very existence make impossible. That the entire PS is now easily tarred with the sins of its managerial class is but the latest in a series of terrible injustices in these matters.
I am not sympathetic to the high pay rates at the top of the Irish civil service (or as Mr Hennigan noted our bizarrely overpaid Taoisigh and ministers), and I have had severe difficulty swallowing the size of pay offs and redundancy packages for even relatively junior members of the wider public service. It is a national embarrassment.
Contrary wise, as disgruntled observer notes, protections and rights for private sector workers have not kept up with those of our European partners (well, excluding the UK and some of Eastern Europe).
I have banged on before about Wilkinson and Picketts “The Spirit Level” before but it mentions the idea of “bicycling syndrome” where stressed sectors of society of roughly equal socio-economic status tend to compete with each other for resources rather than confront more powerful agents. We have that in Ireland in spades and I think that at least some of the antipathy towards the public sector is as a result of private sector workers feeling comparatively disempowered (no unions, poor pensions, poor job security, chronic status anxiety) but rather than fighting for their own rights looking to reduce those of others. Classic avoidance behaviour.
As an aside I would be interested as to why in Ireland we tend to opt for such steep pyramids of status in the professions (barristers and medical consultants being the most obvious examples). Is there a sociologist in the house?
I participated in the thread to which I think you refer:
It dealt with the Employment Control Framework (ECF) and the detrimental impact it would have on the allocation of academic resources under competitively secured research grants. It has since been revised:
The point I was making on the thread – and which the academics commenting on the thread failed to grasp – was, yes, the ECF was likely to have the detrimental impacts about which they were so enraged, but that the correct course of action was to bring it forcefully to the attention of the relevant Oireachtas Ctte and to seek redress and amendment (since, after all, it was the Oireachtas which enacted the piece of legislation which authorised the issue of this ECF), rather than, like medieval peasants petitioning an absolute monarch, seeking to exert pressure on the relevant part of the government machine.
The fact that those with standing, influence and connections can secure modification of the implementation of public policy without going through the democratic process brings the entire system into disrepute – even when the modifications sought are perfectly sensible.
It gives carte blanche to others with similar standing, influence and connections to secure modifications of policy implementation that suits their own interests (which are unlikely to be in the public interest) directly from the government machine. (And this is separate from the ability of those with standing, influence and connections to affect policy formulation – and subsequent legislation – behind closed doors.)
And all this fuels the anger and hostility towards the public sector from those who lack the standing, influence and connections to protect and advance their interests.
The Oireachtas is the forum to debate and decide which interests should be advanced and how conflicts are resolved, but everyone who can seeks to bypass it. There a lot of people out there who are being disenfranchised and feeling powerless to defend their interests. And they are getting angry. And, as so often happens, their anger is being directed at the wrong targets.
“No, what I’m saying is that when dealing with very highly-trained professionals (e.g., doctors, teachers, firefighters) who are committed to jobs that are multifaceted in the extreme, it is totally inappropriate to base management on the assumption that the work is like that in a cannery where nobody would do it at all if they weren’t a) paid; b) required to, and where “performance” (how many tins did you seal today?) is easily measured”
I get what you’re saying but there are parts of that statement i cant help but disagree with. The public sector is not the only place to find highly trained professionals, the private sector is similarly well stocked, making a comparison with a cannery is pretty pointless. I’m not sure there even are canneries left in Ireland now! I agree with you on the amount of middle managers floating around, however i think the problem is too many managers and not enough management or accountability. Doesnt mater how highly skilled or educated you are, standards and goals are important in any workplace. Allowing people to set their own or simply have none is folly.
Agree. Conflict in any society or economy is natural, healthy and constructive when there are clear, agreed and binding procedures to resolve these conflicts – with the courts being the final recourse. But, over the last 20 years, every effort has been made to suppress and smother the major conflicts that arise – the conflict between owners/managers and workers, the very necessary conflict there should be between Parliament and Government and the conflict between final consumers and businesses.
You quite rightly highlight the position of many private sector workers – no unions, poor pensions, poor job security, chronic status anxiety. The Oireachtas (similarly to many parliaments throughout the EU) is totally ineffective. And final consumers are disenfranchised, isolated, atomised in the face of large predatory businesses.
All workers require effective representation in their workplaces. Members of the Oireachtas need to wake up – or be kicked awake – to recognise that they, and they alone, exercise the absolute authority that the people have delegated to them – and that this does not mean electing a government and agreeing to everything it does for the next 4-5 years.
Consumers require effective representation of their collective interests before the competition authority and, where they are required, sector regulators operating in a quasi-judicial manner – and not captured, as they are at the moment, by the businesses they regulate.
But wht am I tiring my fingers? How many times does this need to be said? I think I’d better lie down for a while 🙂
There is a particularly perverse version of the Peter principle at work in our PS. Those who are no good at front line work tend to select themselves for places in management. The endless minuet of committees and subcommittees leads to a deepening disconnect between policy and practice.
The motivated people whom Ernie is talking about stick to their onions. That is admirable, but its not enough.
@ Paul Hunt
By all means lie down. You deserve a rest. Well done mate.
I think you have got to a core problem in our democracy. Our greatest strength as a people is our ability to sort things out informally, face to face, ‘over a pint’ as they say on the northside.
It’s understandable. As Havel says of the Czechs, we are a plebeian nation. We should stop being ashamed of our history. Must stop.
That strength is also our Achilles Heel. Those habits of ‘sorting it out in advance’ are pervasive in all parts of the society. Even the Supreme Court has an eye to ‘what suits’. As you rightly say, we have got used to getting good outcomes by way of processes which would never stand the light of day.
That’s why our executive is so secretive. And its also why our professions are so hierarchical. Top brass are recruited in the main by co-option, and get a fat premium for respecting the law of omerta. Hang together or hang separately is the watchword.
Sunlight is the best disinfectant. Google that from 1914.
I strongly recommend Richard Posner’s writings, especially ‘How Judges Think’, for a flavour of what law is really all about’
Pierre Bourdieu’s ‘Language and Symbolic Power is also a cracker.
“people who chose to work for the country rather than for profit”
Er, then why are pay cuts so contentious? Surely the country remains to be worked for with less pay?
The country is being looted by the noble savages at the top of the PS and private sector tree (there are two trunks, but only one set of top branches – movement between them is easy, unlike at trunk level…). They destroyed it, they cracked it open, and now they have run away with the goo and are feasting on it.
“No, what I’m saying is that when dealing with very highly-trained professionals (e.g., doctors, teachers, firefighters) who are committed to jobs that are multifaceted in the extreme, it is totally inappropriate to base management on the assumption that the work is like that in a cannery where nobody would do it at all if they weren’t a) paid; b) required to, and where “performance” (how many tins did you seal today?) is easily measured.”
Would have to disagree, many areas of the private sector have highly trained professions that aren’t anything like those working in canneries.
In many situations it isn’t possible to attribute ‘profit’ to individual performance but good management can organize, direct and assess the performance of individual members of staff.
The PS isn’t short of managerial staff it is short of effective management.
I would agree with you that the current management structure doesn’t work and top down targets are not the answer.
What is needed is managers who have real power to make decisions, i.e. manage. But with that will come real accountability, meaning if the decisions made are the wrong ones then managers should be removed.
The supression and smothering of conflict is common to most developed economies – and it is in the interests of the powerful and the wealthy. (Ireland is not unique; it’s just that the Irish approach to smothering conflict has equal measures of frustration and charm.) The conflict between businesses and final consumers is smothered in a total optical illusion of ‘competition and choice’. The reality is that businesses impose huge search, information and swtiching costs on final consumers – and generallly use low paid workers to effect this imposition.
And when conflicts threaten to bubble up they can be channelled into self-defeating conflicts such as that between public and private sector workers (main topic here).
Surreal and irrelevant conflicts are also be kept boiling for displacement purposes such as that between the right and the left wrt markets – with the right promoting free markets (even though they loathe and detest them since when they work well they threaten the value of the capital of unresponsive or inefficient firms) and the left denigrating markets (even though effective and efficient markets are the best means of generating economically and socially useful outcomes).
But we run the risk of paralysis from analysis and while we have a Dail whose only effective purpose is to vote through whatever legislation the government machine drafts we’re really at nothing.
You write: “many areas of the private sector have highly trained professions that aren’t anything like those working in canneries.”
I never said that they were. But for those areas of the private sector, management by control is often equally inappropriate.
Not if it is effective management.
I have worked in such an area and know the massive difference having a good manager can make to the performance of a department.
Congratulations on attracting such a large amount of comments. Now if you will indulge me I would like to make a few observations .
Actually the Sindo also carried an editorial the previous week (September 4th) about Social welfare.
Public Pay and Pensions will have to contribute towards deficit reduction (probably by approximately 2.6Bn between now and 2015) as will other sectors but, IMHO ,getting worked up by an opinion piece by Eoghan Harris is a bit unnecessary.
The Sindo also has other writers with various opinions and , like it or not, reflects a lot of what general opinion is in Ireland.
Personally I believe eminent academics and public servants such as your good self would be maintaining the excellent level of service you usually provide (via this site and academic institutions) by publicly accepting that whatever “adjustments” imposed across the economy should be equitable and proportional to individual ability to survive “post adjustment”.
I am sure you will agree a 15% cut on your salary would be less devastating than a 10% cut on a low paid Public Servant or a 5% cut on someones job seeker allowance /disability benefit.
There is also a better chance that a much larger percentage of a social welfare recipient`s allowance or low paid public servant`s salary will be spent within the domestic economy.
Two public statements in recent years are,IMHO, worth recalling:
I believe one was by Leo Vardkar who defended higher Public Service salaries because most public servants were generally better educated.(Apologies to Minister Varadkar if I am reporting his statement incorrectly) The other was by your good self (on this very site if I remember correctly)referring to the fact that many public servants had purchased cars before the cuts which began in 2009 following the pay rise of late 2008.
First let us look at Doctor (he made it before he was a minister)Varadkarś statement : Surely highly educated public servants with a regular income are better equipped than a less educated person to reach for a calculator and adjust expenditure in response to income. After all business people (who may not always be as highly educated as your good self and many of your colleagues) have to do this everyday.
Second let us look at your statement (if I remember it correctly ) regarding purchase of cars by public servants: If cars were purchased by loans in early 2009 by public servants many loans would be reaching “amortisation” in 2012 and no later than 2014. Since 2009, as we all know, prices of discretionary consumer items have not sky rocketed within Ireland. We also know that any houses bought since 2008 are considerably cheaper than the four previous years
Ireland needs to “adjust” its budget deficit by around 10Bn and the Public Service can easily contribute 25% (2.6Bn)of this over the next two or three years without consigning anyone to penury or depriving the domestic economy of much needed VAT. After all a bottle of vino in Tuscany or a nice meal in Turkey does not contribute much towards Irish VAT. On the other hand a few pints “down the local” (with a copy of the Sindo:) or other Irish newspaper ) contributes quite significantly to Irish public finances.
Social welfare can probably deliver another 2.4BN but it is essential that a lot of this achieved by tackling fraud, improving efficiency and encouraging acceptance of jobs. After all practically all legitimate social welfare is spent domestically and contributes towards indirect taxation.
There are also further efficiencies in procurement, capital expenditure and removal of useless tax loopholes. None of these need necessarily consign anyone to penury or discourage enterprise/innovation.
Personally I feel our well educated public service could easily assist in contributing/ implementing all of the above without expending much needed energy on “having a go” at individuals who write opinion pieces in newspapers. The fact that the particualr individual is a pensioner (albeit one who may or may not enjoy controversy) is, for me, also a little disturbing.
I try to avoid “Public Service” bashing but am fully aware of the general perception (not all of it fair) that members of Public Sevice are over paid.
IMHO we should identify where the excesseve salaries in the public service are, tackle them, and immediately abandon arguments between sectoral ( I do not like the use of “vested”) interests within a nation which makes up a tiny fraction of the European population.
IMHO we should only have one “vested interest” : Ireland!
I look forward to reading many more of your postings in the future.
The concept of whatever equity in pay adjustments being based on the individual ability to survive “post adjustment” does not seem to me to have any role in pay policy other than the very short term in a crisis. Welfare should be based on people’s needs, and taxation may reasonably be based on having the wealthy pay more. But the only healthy public pay policy is one based on people doing their job properly and being paid the rate for the job. It seems to me that people accuse unions of expecting their the government to consider the welfare of their members while themselves proposing exactly the same concept.
The point here is that a big pay cuts may affect the deficit but they public finances are an ongoing thing. Proposing public sector remuneration which greatly below market norms will simply mean that the most employable and productive will leave, which will hardly improve things.
@jbkenn your observations on the fire service is spot on. The Northern Ireland fire service is a clear and relevant model and the service in the Republic should be organised into 3 “commands” based on the control centres and each about the same size as the NI one and with a similar number of chiefs. It is ridiculous that that 3 years into the crisis that this almost no progress has been made on this kind of thing and some forthright action by the government is needed immediately.
If Public Servants were “economic units” rather than people than a 2.6Bn pay and pension”adjustment” should be carried out overnight because we are in a crisis which is in danger of no longer being “short term”.
However (unless the euro implodes over the next few weeks) I believe such a cut in itself would also contribute towards a “short term crisis”. Personally I feel such an “adjustment” can easily(and should) be implemented over 2-3 years.
I do not feel public sector renumeration should be “greatly below market norms” but “market norms” have changed quite a bit over the last few years.
I also feel mobilty within the labour force and the fear of public servants “leaving” is not one we should be excessively worried about.Indeed some may even come back at a later stage bringing with them the benefit of private sector service. The Private Sector would also benefit, IMHO, if it included people with Public service experience.
Public Service should be a career choice during various stages of an individuals working life, not a “life style choice”.
There are thousands of public servants who are effectively in a “gilded cage” and would love to have mobility but simple pay comparisons “disincentivise” departure from the Public Service except (as with the Army, Gardai etc )via a golden parachute together with “pensions” paid out to be people who can reasonably expect to live for another 30-35 years.
On the reverse side there are plenty of people who could contribute very effectively for five to 10 years in Public Service but who are prohibited by the reality of a “closed shop”.Such people would not probably be overly worried about modest public sector pay levels because they would also be prepared to spend time working in private sector jobs which would attract high levels of pay.
Welfare most definitely should be based on need and (income/asset taxation) should be progressive but take into account that the wealthier someone is the more mobile they are.
The mega wealthy can “reside” any where they want but the next layer often have to balance quality of life with place of residence. After all there are plenty of countries which offer lower tax regimes than Ireland but the “gain” often comes with other “costs” which may not outweigh the gains.
I think your split of management methodologies into “management by control” and “management by worker commitment” is too simplistic. Apple is an example of an organization combining very strong control with very strong worker commitment – it is not an either/or situation. Most Apple employees are, justifiably, very proud of their company (most Google employees on the other hand tend to be very proud of themselves!). People work there because they want to, not because they have to.
While there may be some principles that could be taken from an examination of the top hi-tech companies, I think the most productive source of material for reform of the public sector would be comparisons with best practice in other countries – e.g. educational system in Finland and Taiwan. In any change to the status quo, however, there are going to be winners and losers, and there has to be enough authority, control and determination to ensure that those who will lose cannot block the change. An approach where everything is “negotiated” is not adequate, since this will always unduly benefit the insiders that happen to be already there.
I worked in the private sector for large US multinationals and for small, start-up Irish companies. The latter was the most interesting and enjoyable work I’ve ever done. Unfortunately I didn’t know from week to week if I was going to get paid. I now work in the PS but I fret constantly that the vastly superior terms and conditions may have made me ‘fat and lazy’ and it is very difficult to consider (even if the jobs market was not so dreadful) returning to the private sector where a vastly different mindset operates.
In response to another posting, I can say after over 10 years in the PS I have never met a public servant who joined/got a job out of the joy of serving the public. For many jobs – nurse, teacher, doctor – the only employer (realistically) in the country is the public sector so it is not a career decision to make. I feel that I owe my employer – whether public or private – the duty of doing the best job I can do, neither more nor less. I should not treat anyone differently because I am working for the public sector compared to how I would behave in the private sector. I have never in my public sector life met someone who claimed to have ‘joined’ (in 99.9% of cases they ‘got a job’) the public sector out of some public spiritedness (excuse the neologism). That is not to say that they don’t have the best motives. Most I have met joined at age 17 or 18 and in the 1960s/1970s it was either the ‘safe pensionable job’ or the emigrant boat. I have a theory that if a psychological/sociological study were done of public sector workers they would be found to be less entrepreneurial, more personally conservative in terms of unwillingness to take risks, etc. than the general population. Many good people do work in public sector but, in my experience, the system (as in all bureaucracies all over the world) gradually knocks the individuality and iconoclasm out of them.
@Karl @ Colm
I would like to suggest a model/experiment for all the economists on this site.
An earlier comment (I think it was Robert Browne) advocated 50% cut to Public Sector Pay and Welfare Payments. As a Political Scientist I know that it is impossible and as an ordinary reader I know it is not necessary.
According to Karl the general deficit is15.6BN. (it is getting lower every time I look) Therefore all expenditure, excluding loan repayments, would need to be “adjusted” by 28% and actually around 26% to allow for “money in the kitty” in order to reach zero deficit.(Much of it may be borrowed but as long as we service the debts the money remains in our “kitty”.
What would be interesting (if this was treated solely as an unemotional hypothetical model) to explore would be the impact this would have on cost of living in Ireland.
One of the social arguments is that pay and welfare cuts should only co-exist with falls in the cost of living. However as we know price also reflects demand so inevitably there would be a drop in the cost of living.
Obviously in “real life” while certain costs can (capital expenditure, procurement, job related allowances) easily be reduced by exactly 26% other exchequer costs such as welfare and salaries would have to range between 24%-28%
I am however willing to guess (without any evidence whatsoever) that cost of living would drop and consequently “standard of living” would not drop by more than 15% because domestic prices and many import prices would have to reflect the new reality.
IMHO such a model would be worth exploring because with a Zero deficit borrowing would drop significantly (bringing bond yields and interest rates down with them) which could then be passed on to welfare and public service salaries possibly resulting in a need for only 18-22% “adjustment. Which may only result in a “standard of living” being dropped by around 5%
With a lower cost of living private sector wages would also drop and international competitiveness increase.
I suspect this scenario has been examined somewhere because I recently overheard anecdotal evidence that some bond traders were suspecting that the the Irish electorate may not favour a return to bond markets until the end of this decade.
Any takers : Karl Colm?
I was waiting to see if you’d get any takers. Being at the end of a long thread probably doesn’t help and everybody is very busy in any event.
This is something I’ve being banging on about for some time. The latest EU stats on the price level of private household consumption:
shows that the cost of living in Ireland has come in from being 25% above the EZ average to less than 14%. (This is also presented in the CSO’s
on p29 which compares price levels to the EU (and not the EZ) average.)
This suggests that the tradable sectors and those exposed to some competitive pressures adjusted their prices downwards, but that the public, semi-state and private sheltered sectors didn’t. This is also borne out by CSO detailed price index data.
Given the role of the state in all these sectors there is no reason why significiant reductions in various fees, charges, tariffs and prices couldn’t be enforced to close the gap with our EZ partners.
A 15% increase in real disposable incomes would result (with a higher increase for those on lower incomes). The only ingredient missing is the political will. The government is either in hock or in thrall to the deeply embedded vested interests that would lose out. It’s far easier to knife into welfare transfers and public expenditure than to upset these powerful forces.
So I doubt you’ll get any takers.
@Paul Hunt the public sector rarely charges a price for things, it charges a charge which reflects a subsidy from general taxation. In the present environment the subsidy is reduced and the charge goes up. It does not make sense for a government with a large deficit to sustain or increase subsidies. The situation is quite different where sheltered sections have cost plus a substantial margin, where both the cost and margin should fall to allow a price decrease.
With all due respect, that excuse for not dropping charges doesn’t wash.
Why hasn’t the TV/dog/driving/etc licences decreased?
Why haven’t regulator charges/mandatory fees been decreased?
I could go on and on.
Because those setting the charges have the power of law to enforce collection and don’t have to change.
The internal devaluation was supposed to happen. Whatever happened to that? All thats happened is the protected sector has gotten more protected relative to the rest of the population.
It does not make sense for an individual or company to charge less when selling/earning less either… But when survival is at stake, that is what has to happen. the above argument is used to conceal inefficiencies and overcharging by protected organizations.
I would prefer to have higher tax rates to pay for government; that yet more fraudulent accounting and stealth theft by protected agencies.
Margins and profits where the consumer has a choice have shrunk. Thats fair enough, thats life…..
And its not just state agencies that have kept or even raised prices. Again, thats life, some have valid reasons, others … its because they can.
But for the state to drone on about internal devaluation and then do precisely zero on their mandatory charges is obscene.
We even see it with new charges such as septic tank inspections which are not at all competitive with our nearest neighbour…
Again, now it is proposed 5% of an insurance bill goes to the state. (I understand Quinn was a private company, but the 2% charge is mandatory and being introduced by a state agency, on top of the 3% tax) Because of the pensioners lobby and some vauge well meaning BS, this charge will be on everything but health/life assurance. Last time I checked Quinn were in that game also…. But someone has decided that a general charge on insurance is the right thing to do but not on a pet sector.
Net effect, more cost, more hidden subsidies for government and from government to protected sectors…. which allows the liars in government claim tax rates are below the EU average….. And publish misleading data.
If the political will was there an internal devaluation could happen. But its much easier to continue the hidden subsidies to connected insiders (whether employees, sectors or industries)…
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