Public Sector Pay Differentials: Regressions Can Actually Be Useful

Last week, the CSO released the latest results from the National Employment Survey, which reports detailed information on earnings across all sectors of the economy.  The data from the survey relate to October 2007.

The first media treatment of the story that I saw was the Sunday Independent’s lead story saying the public sector is “now earning 50 per cent more the private sector.”  My reaction was that while the headline might be true, this wasn’t a very useful way to think about the issue of public sector pay. 

The report also details a host of other well-known patterns: Those with more education earn more, older workers earn more, those in professional occupations earn more.  With the possible exception of Vincent Browne, I’m not sure there is anyone out there who would draw the implication from these figures that the government should intervene to eliminate all these gaps.

Cowen Announces Job Subsidy Scheme

An Taoiseach appeared today before the biennial conference of the Irish Congress of Trade Unions (incidentally, the highlight of their last conference was Mr. Cowen’s predecessor wondering aloud why those who criticised his economic policies didn’t go off and commit suicide.)  The Taoiseach’s remarks suggest that, despite David Begg’s disavowal of it, the €250 million job subsidy proposal is going ahead:

Drawing on detailed discussions with Congress, we are introducing a new initiative to safeguard vulnerable jobs through a Temporary Employment Subsidy Scheme. This will provide a subsidy to support jobs in exporting companies in the manufacturing or internationally-traded services sector.

Perhaps these detailed discussions with ICTU have changed the proposed scheme from the one criticised by me, Sarah Carey, and of course, David Begg.  However, there is no information in the official announcement to suggest so as of yet.  Indeed, it directs us to the document containing the original announcement of the scheme for “more information.”

As an aside, I’d note that the name of the scheme is a bit confusing.  I thought when I read it first that it was a scheme to promote temporary employment via a subsidy.  However, it appears instead to be a scheme that temporarily promotes employment via a subsidy.

Norman Glass

Readers of this blog might recall my support for the establishment of something modelled on the UK Government Economic Service.   I was sad to hear of the passing last week of a great Irish economist though perhaps one of the least known – Norman Glass – who was in many ways one of the architects of the GES.

The Guardian obituary is at http://www.guardian.co.uk/politics/2009/jun/29/obituary-norman-glass

Norman was a pioneer in economics within policy circles.   He was the first economist in the UK Department of Health for example in the early 1970s.   But it was his time at the Treasury where he really made his impact, becoming in effect the Chief Microeconomist and the driver of the microeconomic revival at the Treasury during the early days of Blair and Brown particularly in the aftermath of the Bank of England independence move.  The development of the working families tax credit, the innovations in linking labour supply policy and welfare strategies, major initiatives in education and health – Norman was central to all of these moves and to the early success of the ‘New Labour’ era.   Norman also developed an interest in the early skills formation agenda, designing SureStart (and later became a vocal critic of what the UK Government did with that programme in letting it become bloated and without direction).   On retirement from the Treasury he went on to lead NatCen, perhaps the largest and best social research company in Europe.

Norman was a complete gentleman, quietly interested in what went on in Irish economics, hugely supportive of students and researchers who made contact with him.   He is also perhaps amongst the most influential Irishmen of the late 20th century, albeit also one of the most modest and ‘backroom’, completely anonymous in his homeland.

I thought it might be interesting to readers to learn about Norman, but in passing I can’t help but think that as we face up to the consequences of terrible decisionmaking in economic policy over the past 15 years or so, and how little evidence there is of clever thinking in economics within the Irish civil service, one of the most important figures in policy decision making and in creating the infrastructure for economics in Government in the UK system, was an Irish economist.   Knowing Norman, I suspect he would have found that funny too!

The IMF’s Warnings About Government Policy

One of the elements of the recent IMF Article IV report that I found a bit strange were the claims that the Fund had warned the government about its fiscal policy prior to the current meltdown. For instance, the first page of the report states

Various commentators and the IMF in its Article IV consultations did warn that the seemingly-unstoppable growth masked serious imbalances, including the fragility of public finances.

In his Irish Times article on Friday, however, Jim O’Leary correctly points out that the IMF are engaging in some pretty serious revisionist history and makes some very good points about the flaws underlying estimates of structural budget deficits (weaknesses that I discussed in my recent TCD-DEW talk about potential output.)

Begg Critical of Job Subsidies

David Begg of ICTU has responded to Sarah Carey’s article on job subsidies.  The essence of his reply is twofold.  First, he also thinks it’s a bad plan. He writes that

Carey is correct to point out that a “jobs subsidy scheme” of the nature she outlined would be disastrous. It would be a waste of vital taxpayers’ funds, it would do nothing to ease the jobs crisis and, of course, it would be wide open to corruption and abuse.

Second, the plan wasn’t his idea:

Unfortunately, where she went wrong was in attributing such an initiative to congress. The truth is that precisely this approach has been repeatedly proposed by employer and business groups. We have opposed such feckless initiatives from the outset.