Public service big winners in wage pacts

National wage deals have been something of a mixed blessing, says BRIAN O’MAHONY.

NATIONAL pay deals have been central to the economic success of Ireland, supporters argue. But the point often missed is that what the pay agreements achieved was the replacement of industrial strife with industrially harmony.

As one fan put it, for the first time, labour and capital in Ireland agreed terms that facilitated business growth and allowed wage deals to be struck.

That was particularly relevant in the context of the public sector where strikes by the ESB and other public sector unions could hold this economy to ransom, and at times did.

The ritual around the pay talks has always been well choreographed, with warnings about competitiveness and job losses.

Arguing for or against the pay deals has become fashionable of late, with the Economic and Social Research Institute’s Danny McCoy of the opinion that they have outlived their use given the state of evolution in the economy in recent years.

Research by Barra Casey of the ESRI shows that average gross weekly earnings went from €435 in Q1 of 1998 to €609 in the third quarter of 2003.

On an annual average basis weekly earnings increased 6.4% and hourly earnings 6.8% in the period from 1999 to end 2003.

These are the most up-to-date figures available and it should be borne in mind that while they contain the peak of the Celtic Tiger years the economy was in slow down mode after 2001, the peak year for economic output.

The increase in the average gross weekly earnings from €435 to €609 represents an increase of 40% over five years suggesting workers should be cock-a-hoop with their lot.

However, nominal wage increases against the inflation rate going back to the first Programme for National Recovery employees are something like 6-7% ahead of the total inflation over the period for which data is available, as shown in the accompanying table.

In some ways it is too simplistic to look at average figures.

It is well known that construction and hi-tech earnings went through the roof during the boom years so averages are no more than that.

On the other hand they do show that in overall terms the pay deals have protected earnings against inflation over the period.

One of the key difficulties in assessing the real impact of the talks or the deals over the period since inception is how few people the talks represent overall at this stage.

Right now only 500,000 of the 1.8m workers in the country are directly involved with unions.

In other words, 1.3m of those working in the private sector are not unionised and have no voice at the national pay talks.

The second table shows a more realistic picture of where wages have gone in recent years. Again it comes from Barra Casey of the ESRI.

They compare average gross hourly earnings across a range of sectors.

Significantly it shows that non-market public services saw their average hourly earnings go from €14.9 per hour to €20.1 per hour over the period. This would tend to support the view that the pay talks, as we know them, have been good for the public service but not so good for those in the real world.

Dermot O’Brien of NCB says there is no basis for arguing that the string of pay deals paraded before us in dramatic fashion after the end of protracted talks between the “social partners” have made any real difference to the state of the economy.

“They do not have them in Britain and there is no evidence to suggest it has been disadvantaged in anyway by not having them”, he said.

Interestingly, in the hi-tech manufacturing side of the table, earnings there have gone from just €9.4 to €12.5 over the period.

Bearing in mind that wages being paid to the high fliers in that category were the stuff of legend €12.5 per hour is hardly earth shattering set against the public service.

For the record the non-market public service covers all of the civil service with the exception of the health sector and includes the gardaí, the army and the civil service.

It also excludes the semi-state sector which also comes out well under the average hourly earnings measure.

In the end the tables show that anyone who did get the wage increases due under the pay deals have stayed ahead of inflation.

The problem is that measuring exactly who got exactly what is very difficult especially after the introduction of benchmarking in the public service.

Economists from Mr O’Brien to Jim Power of Friends First and others believe the pay deals should be abandoned as they are something of a smokescreen to keep the public sector from having to justify their annual wage rises.