Author: Philip Lane

Fintan O’Toole highlights the data provided by the OECD Government at a Glance 2011 report in looking at comparisons in public sector pay rates across countries.   As he emphasises, these data adjust for differences in purchasing power across countries.  This is relevant if the goal is to establish the relative living standards of workers in different countries, which in turn is relevant in the recruitment of internationally-mobile workers.

However, it is also relevant to compare pay levels between public and private sectors within a country (adjusting for occupational and skill characteristics etc), since public and private sector workers face a common domestic cost of living and, over some time horizon, the relevant choice for many individuals is whether to work in the public sector or private sector.  This is why rigorous analysis of comparative pay trends across public and private sectors is important in determining whether public sector pay levels are at an appropriate level.  An up-to-date study along these lines would be helpful.

Finally, Fintan O’Toole postulates that the cuts in public sector pay since 2008 mean that PPP-adjusted pay levels for public sector workers have likely declined in Ireland relative to other countries since then. While nominal pay reductions have been substantial, it is also the case that the price level in Ireland has declined relative to many other countries since 2008 so that the decline in PPP-adjusted pay levels is much smaller. For example, the ratio of the Irish price level relative to the average price level for the euro area was 1.17 in 2008 and 1.07 in 2010.

Olivier Godart, Holger Görg and Aoife Hanley write on the Irish experience in this paper.

Abstract: Starting from the observation that all firms in Ireland (foreign and domestic in manufacturing and services industries) were hit by the crisis, the paper asks whether there is a difference in the behaviour of foreign and domestic firms. One hypothesis is that foreign multinationals are less linked into the Irish economy, so more likely to leave once the economy is hit by a negative shock. The paper discusses background hypotheses before giving empirical evidence from firstly aggregate data, and secondly firm-level observations. The analysis of the latter suggests that foreign firms are not more likely to leave during the crisis than Irish firms. Some policy conclusions are offered in the paper.

The announcement is here.

In this article, Wolfgang Munchau addresses one of the key debates in the reconstruction of the euro system – whether banking union (with only a limited degree of fiscal union) is sufficient for a viable monetary union.

The Department of Finance shows its online skills with this Prezi presentation.