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Monday, April 02, 2007

Irish Nurses: Politicians don Hairshirt late in day having been huge gainers from Public Sector Pay Bonanza

The Irish nurses in public hospitals have begun industrial action to press home their claims for a reduction in their working week from 39 hours to 35 hours and a special pay increase of 10%.

Some other groups in the health service have better terms than them and why wouldn't they try to get a piece of the free lunch like so many others, including politicians?

During the dot-com period of temporary insanity, teachers and other public servants bought into the self-serving delusion that stories on the small number in the private sector like Fran Rooney who hit the jackpot with the Baltimore Technologies floatation, were representative of private sector workers, rolling in manna from heaven, while the brethren in the public sector had to survive on thin gruel.

Taoiseach Bertie Ahern is not one for sailing against the wind and he agreed to the demands of public sector trade unions to set up a "benchmarking" body that was tasked with making comparisons between similar grades in the public and private sectors.

In the nod and wink world of Irish politics, the conclusions were agreed before the body was established and such minor issues as the gold plated pensions that were available to Bertie Ahern and others on the public payroll, compared with the zero coverage available to a large number of private sector workers, was conveniently ignored.

Before the benchmarking body was due to report, Senator Joe O'Toole who was then the general secretary of the Irish National Teachers Organisation, left the cat out of the bag when he said that benchmarking was like turning up at an ATM to withdraw cash. The use of the word "benchmarking" was a sham.

In December 2000, a Public Service Benchmarking Body, established under the Programme for Prosperity and Fairness (PPF), was asked to undertake "a fundamental examination of the pay of public service employees vis-a-vis the private sector." Former Davy Stockbrokers' economist Jim O'Leary was a member of the body for a period but he resigned before it reported.

In 2004, O'Leary who had joined the Department of Economics at Maynooth University, published with two of his colleagues, the results of six months' rigorous and painstaking research into public-private sector pay differentials in Ireland - Public-Private Wage Differentials in Ireland, G.Boyle, R.McElligott and J.O'Leary, ESRI Quarterly Economic Commentary, Summer 2004.

O'Leary and his colleagues wanted to discover whether similar people in similar employment circumstances were better or worse off working in the public than in the private sector. In order to do this, they had to control for attributes like age, experience, gender and education, and also for job characteristics like occupation, type of contract and size of establishment.

As the CSO (Irish Central Statistics Office) data does not permit this kind of analysis, the dataset that they had to use, is one based on a large-scale survey conducted by the Economic and Social Research Institute (ESRI) and used for much of its research into poverty and inequality.

The core finding was that on average, public servants earned 13 per cent more than their private sector counterparts on a like-for-like basis in 2001.

The researchers also discovered that the size of this margin (the public sector premium) in 2001 was not significantly different from what it had been in 1994, suggesting that pay increases in the public sector had kept pace with the private sector throughout the Celtic Tiger period.

Another discovery was that the margin by which public service workers outearned their private sector counterparts tended to be significantly larger at the bottom of the income distribution than at the top.

A particularly striking finding was that the estimate of the public sector premium for Ireland was more than twice as large as the available estimates for other countries.

The Public Sector Benchmarking Body recommended pay increases which averaged 9 per cent across the grades examined and cost €1.2 billion a year. Government Departments introduced aspirational targets for staff that would make a laughing stock of a manager in the private sector, who emulated the farcical exercise.

O'Leary says that the Public Sector Benchmarking Body never published its research results and at no stage in its 278-page report did it explicitly state or opine that public sector pay had fallen behind that in the private sector.

Ministers, other politicians and all living former employees of the Irish public service received special payments. Bertie Ahern, Michael McDowell and the rest of the Cabinet got double benchmarking payments.

The gravy train didn't stop there.

Politicians' Pay

Total increases taken by Ministers and TDs since 1997, have jumped 119 per cent, or twice as rapidly as the average industrial wage.

In 1997, the Westminster member was paid a quarter more than the TD, who then earned €44,067. Nine years later the TD/MP pay gap has not just been closed, it has been reversed. Today, the Dáil deputy earns €96,650 and the MP earns 11 per cent less, at €87,132.

Joseph O'Malley of the Sunday Independent wrote in 2006: Few can seriously dispute that the TD has less onerous national responsibilities than his British counterpart. The Dail sits less often than the Commons, and parliamentary life is much less demanding in Leinster House than at Westminster. Never mind that Britain's population is 15 times larger. And its economy is 11 times the size of the Irish economy. The TD represents fewer people in a much smaller country. Nevertheless, Dail deputies are now paid more than MPs to do a less challenging job.

The key to the current high salary status of TDs has been the conjunction of some remarkable series of developments on the pay front.

First, in 1999 the Buckley pay review awarded TDs a special pay increase of some 18 per cent. Buckley also recommended that Dáil deputies' pay should be linked to that of a principal officer in the civil service. Second, in 2002 the benchmarking review recommended a 12 per cent pay rise for principal officers.

And because TDs were linked to principal officers, they also benefited from that award. Since 1997, the 30 per cent from the special pay awards, when added to the normal partnership pay rises, has meant that the pay of Dail deputies has more than doubled.

It is up 119 per cent, or twice as rapidly as the average industrial wage.

Irish Public Sector Pay

Pay - Irish Public Service 2001-2006: Salaries up 59%; Payroll up 18% - 38,000 additional workers and Pensions up 81.3%: Average industrial wage rise in the period was 19%:

Irish public service salaries rose by 59% in the period 2001-2006 and the payroll expanded by 38,000 extra staff.

Increases in public sector over the period due to general rounds total €2,479m (or 24.3%), “special” pay increases (primarily Benchmarking) total €1,328m (or 13%), and other factors (such as extra numbers) total €2,193m (or 21.6%).

Stripping out the additional staff, the average increase was 38%.

The increase in the average industrial wage for a male worker in the period 2001-2005, was 19%.

- most private sector workers on the industrial wage do not have an occupational pension. So the disparity in gains is greater than the 100% difference in the period 2001-2006.

The Exchequer’s annual wages and pensions bill increased sharply from €10.2 billion in 2001 to €16.2bn last year, with what has been termed "benchmarking" accounting for up to €1.32bn of the rise.

Conclusion

Minister for Health Mary Harney is now telling the nurses that the country cannot afford a big pay increase or a reduction in hours worked.

It's a bit late in the day to don the hairshirt when Mary Harney and other politicians were happy to nod through sham benchmarking and other huge increases for themselves, as if they had somehow found the philosopher's stone that would transmute the good times of the Celtic Tiger property boom, into a permanent prosperity.

As to a postscript on sham benchmarking, with its joke targets, last January, the Taoiseach asked the OECD to put forward proposals on public sector reform - six months after the general election!

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