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News : Irish Last Updated: Sep 27, 2009 - 6:27:27 PM

Public sector economists confirm Irish public service pay benchmarking was a sham; Premium on private pay increased dramatically from 9.7 to 21.6% between 2003 and 2006
By Michael Hennigan, Founder and Editor of Finfacts
Sep 21, 2009 - 4:06:36 PM

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A paper published in the current issue of the Irish economics journal Economic and Social Review, authored by public economists, confirms that public service pay benchmarking was a sham and shows that from the 2003 and 2006 National Employment Surveys, the public sector pay premium increased dramatically from 9.7 to 21.6 per cent between 2003 and 2006.

The paper, Benchmarking, Social Partnership and Higher Remuneration: Wage Settling Institutions and the Public-Private Sector Wage Gap in Ireland, by Elish Kelly, Seamus McGuinness and Philip O'Connell, staff of the publicly funded but independent Economic and Social Research Institute (ESRI) says the authors investigated the impact of awards implemented under a number of wage setting institutions on the pay differential. These include the pay increases awarded by the Public Service Benchmarking Body in its first report (which excluded consideration of the public sector pension scheme, which for politicians and the rest of the public payroll, gives the right as pensioners to get each increase, current occupiers of their last positions get).

The pay increases that were awarded under the Social Partnership process in Sustaining Progress and the Mid-Term Review of Part Two of Sustaining Progress are also captured in the data used. Furthermore, they assess the impact of pensions on the gap. The results indicate that the public sector pay premium increased dramatically from 9.7 to 21.6 per cent between 2003 and 2006.

Furthermore, the authors found that by 2006 senior public service workers earned almost 8 per cent more than their private sector counterparts, while those in lower-level grades earned between 22 and 31 per cent more. The public premium results derived in the paper relating to March 2006, predate the payment of the two most recent Social Partnership wage deals, along with the pay increases awarded in the second Benchmarking exercise and by the Review Body on Higher Remuneration in Reports No. 42 and 43.

The authors say the results presented raise serious questions with respect to the justification for any further boosts to the pay levels of public sector workers. Finally, the study highlights the importance of correcting for differences in pension coverage between public and private sector workers when making any assessment of the public-private sector pay differential.

Ministers and other politicians took the benchmarking payments as well as senior public service managers and central bankers. Unless they were all idiots, some must have known that the payments they took, were based on a false premise.

Ignoring pensions was self-serving for a start and in 2004, economists at Maynooth University showed that comparing pay for comparable jobs in the public and private sectors, showed that the premium was on the side of public sector staff.

The political leaders of course were not interested in facts.

Whether it was sham benchmarking, or issues of public policy or the lack of policy, there was not one senior person in the political leadership, senior civil service or central bank, who stood on principle and resigned during the period of reckless mismanagement of the economy.

The first benchmarking payment is currently costing at least €2 billion annually.

SEE: Lenihan says total cost of State pension for an Irish public sector worker hired after 2004 is 26.1% of pay

The majority of Irish private sector workers do not have even a basic occupational pension.

Irish public sector pay excluding pensions exceeds private sector pay by 10% for top jobs to up to 30% for other grades

Where is the Outrage? Gombeenism thrives at home while in Paris, OECD staff work on proposals for Irish public service reform - -  Oct 2007 article following recommendation that Ireland's Cabinet be the best paid in Europe and a pay hike of 25% for the Secretary General of the Dept of the Taoiseach, who was in charge of the first benchamrking process, five years before. The Dublin City Manager, who was less than two years in the job, was given a 36% pay hike and the pensions of his two living retired predecessors were also increased by 36%  - -  this system seems like a joke but it is reality.

IBEC calls for ending of pay parity link in Irish public sector pensions that gives them a six-star standard status

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