Public sector pay - ESRI figures show pay cut is inevitable

THE Economic and Social Research Institute is expected to confirm tomorrow that State employees earned up to 25% more than private sector workers in 2006.

In the three years since those comparisons were made it is certain the gap has widened as so many private sector workers accepted cuts in an effort to stay in work.

Public workers had a pension levy imposed in that same period. The ESRI found that in 2003, public sector workers earned on average 9.7% more than their private sector counterparts — but that by 2006, that gap had widened to 21.6%. However, when a value is placed on public sector pensions that gap widens to almost 25%. The ESRI observed their valuation of public pensions is conservative.

When these unsurprising but alarming figures are published the usual knock-and-drag will ensue. Some public sector union leaders will say that the figures are based on “incorrect assumptions”. Others will threaten all sorts of industrial action insisting that “we have taken enough of the pain for a problem we did not create”.

Naturally enough business interests and voices from outside the social partnership will renew their calls for pay cuts right across the public sector.

Speaking in Tullamore Taoiseach Brian Cowen yesterday continued to create the mood music for such an eventuality. He said public sector pay and pensions will be considered in the Budget but that it was important not to get involved in “word games” in the meantime.

However, no matter how much passion is provoked by tomorrow’s figures one thing is certain. We cannot continue to borrow €400 million a week to run this State. Because of this public pay levels and social welfare payments will be cut. This will present the Fianna Fáil Green coalition with challenges greater than any faced by this generation of politicians.

They will face the wrath of the highly organised public sector unions and all of the groups, voluntary and professional, who represent those dependent on social welfare. It will present the opposition with a great challenge too. They, especially Labour, will have to show they have the capacity to govern even if that means public sector cuts.

The ESRI figures are not the only ones that will cause difficulties.

The Review Body on Higher Remuneration in the Public Service is expected to recommend pay cuts for judges, government ministers and university chiefs. It is impossible to imagine that general public sector pay could be cut unless the recommendations of this body are implemented in full.

It is impossible too to imagine that private sector workers will accept further tax increases unless public sector rates are cut. How could they be expected to pay more to sustain the impossible Ahern legacy?

The ESRI remind us that the International Monetary Fund has warned that increases in public wages hit Irish competitiveness by pushing up wages in other sectors.

Their findings indicate not only that there was no justification for increases in the 2007 benchmarking exercise, but that any more increases would further undermine Ireland’s efforts to restore competitiveness.

Dress it up any way you like, twist and turn any way you like, the reality is plain enough: we could hardly afford our public pay bill and our welfare bill at the best of times, we certainly cannot afford it now.

Inevitably these issues will have to be confronted and it would be wonderful if the sectional interests in this society accepted that and fought the great crisis facing us all rather than each other.