Irish Economy: Researchers at the ESRI (Economic and Social Research
Institute) say that the average public/private pay premium in Ireland in
2010 was 17% when allowance was made for skills and organisation size excluded. It was
0% in Finland and Germany . The public pension scheme and level of coverage is also vastly
superior to what is available to private sector workers. Besides, Ireland retains the 1850s British Empire
era lifetime job guarantee for public employees.
The economists, Elish Kelly, Seamus McGuinness and Philip O’Connell (UCD
Geary Institute), say in a paper published today in the 'Quarterly Economic
Commentary' that analysis published by the Central Statistics Office (CSO) in
October 2012 suggested that the public/ private sector pay gap ranged between
6.1% and 18.9% in 2010. The report also showed that the premium
fell between 2009 and 2010, which is to be expected given the substantial public
sector wage cuts implemented in 2010.
[pdf] says that on average, public sector
workers earned over 26% more per week, and 40% more per hour,
than employees in the private sector in 2010. However, as the CSO report notes,
much of this differential is due to differences between public and private
workers in terms of education, experience and other factors that influence pay.
Thus, while the average hourly pay of public sector workers might be 40%
higher, if half of this were attributable to superior experience and education
levels of public sector workers, then the estimated public sector pay premium
(i.e. the part that cannot be explained by differences in the characteristics of
workers) would be 20%.
However, the economists say that the CSO categorised all public sector
workers as employees of a large organisation.
The paper says the application of this organisational size premium in
such a universal fashion gives rise to difficulties given that most schools,
Garda (police) stations, etc., do not in fact employ very large numbers of
people. Moreover, while wage bargaining is undertaken at enterprise level, that
variable is captured by the inclusion of the trade union membership. "In the
latest CSO report, we can see that the inclusion of the enterprise measure of
organisational size leads to a reduction in the estimated pay gap by half, i.e.,
between 6.3 and 8.5 percentage points (Table 1 above)."
The economists say: "We believe that the data at hand require that estimates
should be based on a specification that excludes organisational size as a
control and that the data should be weighted to ensure that it is representative
of the population of employees in employment. We note that the IMF has taken a
similar view on this issue in its recent discussion of public sector pay levels
in Ireland in the December 2012 country report . Consequently, we are of the
view that the average public-private pay gap in Ireland in 2010 was likely to
have been close to 17%."
Statistics Finland reported that Finnish pay, which
was similar to Irish average pay, in 2010 was higher in the private sector for
all age ranges than in local government. Central government staff in their 40s
had a small premium of about 4%. Overall, private sector pay was above the
In 2011, research published by the German
Macroeconomic Policy Institute (IMK) shows that in 2010, the average hourly
labour costs (including social security costs paid by private sector employers)
were €28 for the Irish private sector and €34 for the Irish public sector.
The rates for Germany were €29 per hour in both
sectors; Finland's rate was also €29 in both sectors and the UK was €20 per hour
in the private sector and €21 per hour in the public sector.
So the Irish public sector had a premium of 21%
before accounting for the benefits of the special pension scheme.
'The National Strategy for Higher Education to 2030'
report which was published in January 2011 stated: "Salaries account for
three-quarters of total current expenditure on higher education in Ireland –
compared with an international average of two-thirds. This means that Irish
higher education operates with lower (nonpay) recurrent expenditure than is
typical in other countries."
IMK report in German