Pay must be fair for all, not just the public sector

Close on 13 years ago, the benchmarking body announced sweeping pay increases right across the public sector, with an average pay increase of 9%.

Some got well above that figure and still weren’t happy. Others didn’t do so well. Those increases, and the ones that followed, from the benchmarking bodies with promised, but not delivered, productivity increases helped to sow the seeds of what befell us in 2007 and onwards.

In column after column, since that time, reference is made to the parts played by the bankers, economists, failed regulators, builders, developers and others.

However, the part the unions played is never really mentioned and certainly never dwelt upon. Nevertheless, there can be no doubt that excessive unearned pay increases to public servants from the public purse contributed to the depth of the recession. After all, to pay out you need to have earnings. If your earnings fall, your ability to pay out falls. This is not rocket science.

Yet, while the recession raised its head in 2007, it was several years later before meaningful changes were made to public sector pay.

These pay increases came just two short years after the dotcom bubble which put the kibosh on many up and coming internet and IT companies and created, what turned out to be, a mini downturn. Yet, rather than learn from the fact that markets can go down as well as go up, we saw fit to commit to billions of additional ongoing payments.

As we all know, the giving is easy but the taking back is oh so difficult.

At this point we have to ask ourselves, is it any coincidence that the results of a questionable benchmarking exercise were announced less than two months after the general election of 2002. Many of us will recall that Fianna Fáil won this handsomely. We saw what followed its policy on financial and fiscal regulation and management of the economy was as laissez faire as its policy on pay to its own employees.

Should we now ask ourselves: ‘are we about to repeat history?’ as the Coalition begins to unravel the wage cost savings constructed with so much difficulty a few short years ago?

It’s not too hard to conclude that this government will do whatever it has to do to get itself re-elected.

We understand that the unions’ simple role is to better the interests of their members. Government, on the other hand, is supposed to look after all of our interests. Yet, that is the very last thing it appears to be doing as it seems to be prioritising its own re-election.

Shane Coleman, writing elsewhere, suggested that the issue of public sector pay rises is Public Expenditure Minister Brendan Howlin’s biggest test yet. Without doubt, that statement is accurate. Failure to deal with these public sector claims properly, or dealing with them by increasing taxation, or by holding onto the unfairest tax of all, the USC, or by increasing our borrowings will be unforgivable, and will put in motion the seeds of future disaster.

Intriguingly, on Tuesday, we read that ESRI economist, John Fitzgerald, also believes that the public sector should get pay increases.

Mind you, he doesn’t comment on any implication increased pay might have for increased borrowings and where that might lead. We are, after all, borrowing well north of €4bn per annum as it stands.

To be fair to John Fitzgerald, he does say, however, that the approach to pay determination in the public sector in the future should be more closely linked to what is happening in the private sector than it was in the bubble years. Hopefully, in saying in the future, he was not having a St Augustine moment?

In any event, as the title of that article suggested, there should be pay parity; that is, without an attaching premium but that, of course, means that the public sector defined benefit pension as well as the better terms, conditions and security must be also taken into consideration, and not just the raw salary numbers.

Paul Mills


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