The public sector pay gap in a selection of Euro area countries Post author By Philip Lane Post date December 14, 2011 The Irish data are compared with other countries in this ECB study. Categories In Uncategorized 40 Comments on The public sector pay gap in a selection of Euro area countries ← Economic Adjustment Programme for Ireland – Autumn 2011 Review → A Yes or No Referendum on Euro Membership? 40 replies on “The public sector pay gap in a selection of Euro area countries” The best line in the report, from a quick gallop through it, must be that at page 30 in respect of Slovenia. “One possible reason for the relatively small public sector premium as compared to other countries is the inherited socialist tradition, which was oriented towards equality of all workers”. Since the EU-SILC doesn’t collect information on whether individuals work in the public or private sector, this study is really a comparison of wages of workers in some sectors (public administration, education and health) with wages in the remaining sectors. It is necessarily very rough as a result. I would be much more inclined to rely on the NES-based studies by Kelly et al, the CSO etc. Most interesting table is Table 5 – potentially calls into question the whole rationale of only cutting senior civil servants pay as the public sector wage premium is actually higher for lower-middle income workers than higher paid workers, especially for male lower paid workers. If Croke Park does get renegotiatied I wonder would this be examined?? Lots to chew on. It does seems odd that an organization like the ECB which claims to be so single mindedly concerned with the non ideological pursuit of “price stability” should concern itself with wage comparisons between sets of public servants in different Eurozone members, which seems part of a much broader agenda. That having been said, at least the data is (are) there. I wonder will Fintan O’ Toole write an article on this report – I doubt it. Greece, Ireland, Italy Portugal & Spain are the worst offenders – I wonder what else they have in common. Public sector premiums are a form of institutionalized corruption. Those who benefit from them often deny they exist despite the balance of the evidence. I use benefit there to include people whose political views and electoral prospects are helped by ignoring the evidence, and not just people who actually receive the premium. If you view pubic sector employment levels and wages as in part determined by political patronage it makes sense that people at the lower end of the scale receive the greatest premium – these people vote in numbers that matter. Vested interest Nick that issue, of the higher wedge at lower levels, has been discussed elsewhere re here. Christy “Public sector premiums are a form of institutionalized corruption.” wot, all 300k are corrupt? You should write for the Mail/Sindo “corrupt public sector alien asylum seeking transgendered babies took my job” “If you view pubic sector employment levels and wages as in part determined by political patronage” aunt, balls, uncle. @ Nick Sorry, but that’s a misinterpretation of quantile regression. The quantiles are within a given set of worker characteristics, and not between income groups. @Philip II Not only is: “Public sector premiums are a form of institutionalized corruption.” true but, yes, in a way it does actually follow that ‘…all 300k are corrupt’ but only in so far as they benefit from from slavery (i.e. the tax slavery of the Private Sector / unborn private sector / European taxpayers who are paying via the Troika etc…) I love the way you imply that suggesting PS workers benefit from a ‘corrupt’ system is kind of like killing fluffy bunny rabbits. It’s quaint. Endearing almost. …furthermore ‘view pubic sector employment levels and wages as in part determined by political patronage’ is quite literally and self-evidently true. What do you think de-centralisation was? What was the Haughey administration about? Why are there no serious redundancies in the PS? Answer: Politics. Once you remove the Gards from public service pay, the pay gap virtually disappears. Technical/teaching/administrative staff seem to be paid roughly in line with the private sector. Not that I’m suggesting Gards are overpaid. It’s a pretty tough job, I doubt I’d do it for the pay they’re on -and it’s poor form to criticise the remuneration of someone when you wouldn’t accept it for the same job. However, the equivalent security work is abysmally paid in the private sector. Of course once you start moving outside the public service, into the wider public sector (including semi-states), then the gap grows dramatically. ESB, CIE, Ports, DAA, Coillte -many of these jobs are dramatically out of line with private sector equivalents. They enjoy similar security to the public service, but pay equivalent to or even greater than the private sector. Furthermore, they have not been systemically included in the paycuts meted out to the public service. Part of the poverty of debate in this area is the lack of detail in media commentary, especially as to the different treatment of different groups. The Sindo is particularly determined to bomb anyone who looks at this thing rationally. @Philip II Just one more thing. It may be that accusing people who question the most overpaid public sector in the world (What DO we get for the massive salaries and taxes that fund the Health System? – answers on a post card please.) of churlish extremism is what passes for polite commentary in the make-work-for-clever-middle-class peasants status factory that is the politically-networked Irish State (after all Rome had Cato, Ovid and Seneca) – but the truth is that the government is paying many thousands of people who simply shouldn’t be employed at all. It is governing on their behalf and not on behalf of the taxpayer / unborn citizen. @ Ger “Once you remove the Gards from public service pay, the pay gap virtually disappears” That’s very interesting. Do you have a link to the maths that supports this? Thanks @ Ger “Once you remove the Gards from public service pay, the pay gap virtually disappears” That’s very interesting. Do you have a link to the maths that supports this? Thanks look like it uses 2004-07 data does not seem to include pensions – despite this being an absolutely key difference A better way of thinking about this is what would happen if we cut the pay of various high-paid public servants. There are some public servants where pay cuts would not necessarily be a good idea. Orthopaedic surgeons perform a useful function and could easily move into the private sector or emigrate if we cut their pay. Lots of other medical consultants (geriatricians? GPs via the GMS) don’t have the same choices. Then there are the no-brainers – academics in sociology departments are a good example. If we cut the pay of all these people in half what would they do? Emigrate? We should be so lucky. @ Edward http://www.esri.ie/UserFiles/publications/20091102110232/WP321.pdf This paper is the best in this area. It is a few years old, but still useful. It predates the cuts of 2009/2010, but nonetheless shows significant differences in the premia of different sectors. Security and semi-states enjoy by far the largest premia (see Table 12). Civil servants, teachers, local authority staff and nurses all enjoy premia too, but smaller ones which I (perhaps foolishly) presume have been eliminated in subsequent pay cuts. Ironically, the Gards have taken the least pay cuts as the pension levy is levied on core pay which is a smaller part of Garda pay. Even worse, the semi-states were not systemically part of the public service pay cuts at all. @ Jonny Foreigner “academics in sociology departments are a good example. If we cut the pay of all these people in half what would they do? Emigrate? We should be so lucky.” 🙂 I have pretty low tolerance ofr sociology professors myself. They all seem to have a personal axe to grind and use sociology to give a veneer of authority to these mini-crusades. I posted this data earlier on the employment thread: Eurostat data shows that in early 2010 the Polish private sector hourly wage cost (including fringe) is €7 compared with €29 in Germany and €28 in Ireland. UK hourly pay cost was €20 in both the public sector and private sectors. German public pay was less than its private pay at €27. Finland’s public and private hourly pay cots are both at €29. Ireland’s public hourly pay is €34 – – 25% higher than the private sector and that was post the 2009 cuts. I’m not really sure how much this paper adds to the debate. I suppose it constitutes further evidence that public sector pay premiums (excluding pensions and only up to 2007) were large and concentrated at the the lower end of public sector pay grades. It may be evidence that public sector pay premiums in Ireland are (or at least were) large compared to pay premiums in other eurozone countries. Although I think the evidence on this point is not unambiguous as there seems to be other studies that don’t find the same thing. The conspiracy theorists may view this study as having more credibility as it is performed by the ECB – on teh other hand it could have less for the same reason. It seems a pity that pensions were included It seems strange that this is not a statistic that is regularly calculated – the state should fund the collection of the necessary data. should say that its a pity pensions were not included @ Ger Many thanks for that link, it makes for an interesting read. @Aedin, Ger It would make for a productive use of academic time to see an update of the cso and kelly et al work. In the wake of 2009’s de facto cut and 2010’s actual cut it would be interesting to learn what the estimated public service premium is now, or if it even still exists. Examiner You assume that any evidence which contradicts the idea that the public sector are wasteful, overpaid, nay corrupt, drones leeching the precious bodily fluids from real people would be heeded. As KW pointed out a while ago, there are those who would see a cut of 100% being too little. Closed mind catches no arguments. see Ger and J F who blithely dismiss a whole sector based on impression, innuendo and half recalled pub conversations. No, I’m not a sociology professor but sn Sme-er. Of course we need to cut the public sector pay bill, but we don’t need to devolve into the kind of language which if one inserted Jew in place of PublicSectorWorker would be first water sntisemitism. And no, I’m not Jewish either. The public service sweep our streets, educate our children, police our public places, nurse us when I’ll, heal us when sick, and so on. They are out neighbours, family and friends. So, less demonising and more rationalising. @Tonicforthetroops You can count me into the category of people who would not be satisfied with a 100% pay cut for some (I stress some) of our public servants. I’d also cut their pension entitlements. jF So, whom would you sack.. And how much would it save, after legally binding redundancy payments and tax? I think we deserve to know…. You do have figures , dont you, I mean, it wouldn’t just be someone sounding off? @Tonicforthetroops “The public service sweep our streets, educate our children, police our public places, nurse us when I’ll, heal us when sick, and so on. They are out neighbours, family and friends. So, less demonising and more rationalising.” While some people may “demonise” people who work in the public sector complaining about those people does not answer the questions raised by this report. This public policy debate is unusual in that the facts and the inferences from the facts are pretty clear. 1 The balance of the evidence shows that public sector workers are paid a premium. 2 It’s widely agree that they ought not to be, (public sector unions agree to this point) While I would agree that people over egg the effects of this (in terms of savings to be made) – it’s also true that people over egg the extra revenue that would be gained by raising marginal taxes on people on high incomes. Further, the biggest, albeit often implicit, over egging is done by people who focus on high earners in the public sector and the wages of politicians. It’s very easy to give out about politicians pensions or golden handshakes to senior civil servants because pretty much everyone agrees with it. The media think that by doing so they are performing the role of holding people with power to account – and they are doing that. Savings can and ought to made here. But if the media or commentators in general don’t go further and point out that; 1 The saving to be made by cutting the wages of politicians and well paid civil servants, while not entirely insignificant, are not substantial in the context of reducing our budget deficit. This is a fact/assessment that you rarely here in the mainstream media when these issues are discussed. I would hazard a guess that the “man on the Clapham omnibus” does not really appreciate how relatively unimportant these saving are. As a result people view a decision to cut spending in other areas as a choice not to cut the wages of high earners at the expense of other spending. 2 The highest premiums are at the lower end of the scale.Cutting these wages would bring about savings of a more substantial scale because of the number of people who are in these pay brackets. @Tonicforthetroops Half the academics in Ireland should be sacked in the morning. I’d replace them with young post-docs on lower salaries at lower grades who are evaluated every 5 years and sacked if they don’t produce. This is something we should have done 10 years ago, it has nothing to do with the financial crisis. I say this as a senior academic at an Irish university. Re the ‘demonising’ comment – if a builder did some work for you and you thought he overcharged would you complain? And would that complaint be demonising the builder? Johnny Foreigner, TCD have gone in the opposite direction to your proposal – they have decided to call everyone a ‘Professor’, and in doing so are devaluing the title. Bizarrely they put it to a vote amongst the staff. A similar vote amongst the inmates in Mountjoy to vote themselves into a new category called ‘innocent’ would also get passed with a similar majority. Can’t believe TCD asked the staff. What the hell have they got to do with the decision? If they want to be a ‘Professor’ they should work hard and publish, not sit back and take someone else’s hard-won title and then ruin the title in the process. Similar to a point Joe Durkin made on Vincent Browne recently about (senior) academic staff in Ireland: “they pay themselves as if they were in Harvard, but they wouldn’t get into Harvard”. (The vast vast majority of them anyway). I believe much of the “premium” that public sector workers are alleged to enjoy is simply due to one fact: women in the public sector, while still making less than their male equivalents, are paid a much higher fraction of a male wage than are women in the private sector. In other words, complaining about this “premium” is essentially complaining about the fact of (near) wage equality in the public sector and insisting that the wage inequality of the private sector be the norm because dictated by market forces. @JohnnyForeigner Evaluating lecturers every 5 years will make it very easy to recruit from abroad, won’t it? Especially with the constant demonising of the public sector here, the fact that houses are still unaffordable, and the general demoralised nature of life here for everyone. You’d better hope all your young Irish post-docs are really up for the job and that you produce enough of them. @Paul MacDonnell How could anyone ever accuse someone who claims, with an apparent straight face, that Ireland has “the most overpaid public sector in the world” of “churlish extremism”? @Peadar Coleman If you think academic staff in Ireland are paid similar to what they make at Harvard, you’re really in no position to comment on anything in this debate. The claim is false (except, of course, when discussing the self-administered remuneration of our betters in academic administration as well as that of our esteemed colleagues who are also medical consultants). I suppose I shouldn’t be surprised when propagandists put forward outrageous lies in the media. That’s how the game is played. Let’s just stop pretending that the facts of the matter have anything to do with it. Very useful stuff … … linked to the false revenue from the ‘boom’ when the bad four went really bad after 2000 … The future structure of the Irish labour market remains open … for a while. @Ger I understand that the Garda overtime budget has gone way down in recent years, so the fact that they don’t suffer as much from the pension levy as others doesn’t mean they haven’t also taken big cuts. @All The primary driver for the Public Sector pay premium was in fact property based. When Mary and Tom (both public servants) walked into their local bank in 2002/3/4/5/6/7 complete with private sector benchmarked salaries (with virtually no normal private employment market risk attached) and suggested they wanted to buy a house the red carpets appeared from all angles. The seeds as we now know, of this premium treatment were well laid in the roll out of the Benchmarking debacle, both the I and II versions. When did benchmarking Public versus private employees ever make any sembelence of sense. At the time the Govt (not surprisingly) ensured that it was all very sensible and as a nation we have significantly regretted that decision and will do so for at least another 5 years until wage rates through the passing of time are brought back into line. As a result of benchmaking, public servants wage rates in fact ended up in most grades significantly higher that their private brethern and the seeds of effective ‘Govt crowding out’ developed in rapid fashion. Compare the credit risk of Tom and Mary above with a similar private sector working couple following benchmarking. Every day of the week the bank will side the Public couple on a like for like comparison. I should know I did the selection on many occassions. When a private sector employee is being out bid by a less risk taking employee (in economic terms) in each and every housing transaction – what do you think happens. You guessed it private sector employee goes back to their employer and demands higher pay rates – and in a world back in 2002/3/4/5/6 in tight labout markets employers gave in and the merry go round started in earnest and Irelands drift into massive uncompetitivness became a national sport. The need for public servants to cry foul for significanly higher rates in 2001/2 came primarily because of a need to get a foothold on a rising property market. The easier credit access and mis pricing of property assets in the interim by the banks using inflated public sector sector salaries as a method of property asset pricing has us where we are today- screwed, royally screwed. At the heart of issue now rests a mis priced asset being property and the equivalent mis priced and now unaffordable mortgage debt. The pricing of public sector wage rates to European norms simply cannot happen until the debt on a mispriced asset has either been written off, parked, passed to the ECB or by whatever means got rid of. Table banging about Croke Park reviews etc is an utter waste of time until the elephant in the room i.e. mortgage debt is written down to a market long run rental yield based property price. All other avenues are cul de sacs as last weeks Summit and all other previous 15 Summits are being continually told by the market. Its the debt stupid. I think their analysis of the Irish situation in their summary showed a clearer understanding than many in Ireland have of the mixing of benchmarking and “social partnership” (a term which they rightly felt required warning quotes). If Bertie and Irish trade unionists have done the world some service it might be to ensure it’ll be a long time before any developed country emulates Ireland’s party-time pay awards. My OH works in the public sector and was for a couple years getting 4 pay rises a year,1*increment + 1*benchmarking + 2*partnership. Will we blame “the speculators and gamblers in German and French banks” for this aspect of our stupidity as well? Would we have a case for asking for an explicit 20% yearly subsidy from Germany for Irish public salaries since was our insane use of boom tax receipts from the spending of German money that funded the rises in the first place? That makes it their fault – right? Another amazing thing about the whole debacle is that at the few areas of the public sector where salaries were genuinely below private sector rates, such as IT, they’re still largely below private sector rates. Why? because instead of concentrating rises on the few areas where there was a difficulty recruiting staff they rose everything and made sure to keep specialist staff rates well below middle and lower management pay rates – after all – there’s a 200 year old class system to enforce. Ireland’s solution would be like an MNC struggling to recruit a specialist engineer and deciding the only way to fix the problem was to increase the salary of everyone in the company. While semi-state companies (which now includes most of the banks) have been slower to implement pay cuts and reduce employee numbers than the publc service in general, I think we are likely to see some catch up on that front over the next year or two. I think this is especially true for companies that will likely be privatised over the next few years as the government will want to improve profitability to increase potential sale values. The ESB for instance has said it is targetting a 20% reduction in salary expenses. Ernie Ball, I did not say I think ALL “academic staff in Ireland are paid similar to what they make at Harvard”. Many/most junior staff are not over-paid. I quoted Joe Durkan, himself back as a lecturer in UCD – & who also said that his colleagues ‘of course don’t like me saying it, but it’s true’ I wrote: ‘…(senior) academic staff in Ireland: “they pay themselves as if they were in Harvard, but they wouldn’t get into Harvard.”…’ So I don’t accept it when you say, “you’re really in no position to comment on anything in this debate”, and I worry how you mis-quoted me. Is it because of (1) you are simply a vested-interest, and your judgement can get clouded? Then your comments on this should not be treated seriously. (2) you twisted it, inadvertently, in rushing to a quick defence. Then not exactly what society needs, to educate the young minds coming up, nor as an objective fair scholar. (3) you twisted it, intentionally, in a more active way than (1), then definitely not what society needs, to educate the young minds coming up, nor as an objective fair scholar. @Peadar You’re making a distinction that I didn’t (and don’t) see as making any difference, since it is also false that “senior academic staff in Ireland pay themselves as if they were in Harvard.” So whether you’re making the broad or the narrow claim, it’s still false. So I’m left wondering why you would make such obviously false claims. Is it because: 1) you are simply invested in the idea that the public sector, and particularly third-level education must be ripping off the taxpayer? 2) you frequently cite others’ statements as authoritative, ignorant of whether they are true or false? 3) you cite others’ statements as authoritative in full knowledge of the fact that they are false because it allows you to bullshit others? Which is it? @Philip IMHO on first glance I cannot see how this “selection” can add anything to the debate. The “selection” only includes six of the EU 15 and one of the 12 accession states. Perhaps I am wrong but after seeing the “selection” I decided that although the ECB may be wasting my tax money on this (for whatever purpose) I would not waste my time on reading it. 🙂 […] done if we wish to exclude the lower paid from same. And this ignores the evidence that in fact any wedge between public and private sector is greater at the lower level than at the top. In addition, there are problems that are never mentioned as even existing when the advocates of […] Comments are closed.