ISME gives a qualified welcome to the Government decision to increase public sector pay

  • The planned increase in public sector pay at the end of this year is to go ahead.
  • The Q1 differential between public and private sector pay was 33%. This differential will increase
  • The €105bn bailout of our public sector during the last recession is responsible for more than half of our current national debt.

————————————————————————————————————The Minister for Public Expenditure and Reform has announced the Government’s intention to proceed with the planned increase in public sector pay at the end of this year. However, ISME believes given the state of the Exchequer finances, this pay increase must be conditional on the delivery of efficiencies sufficient to ensure it does not increase the burden on the State. 
The Q1 differential between public and private sector pay was 33%. This is the smallest differential for over five years, but the divergence will likely start to increase again because of COVID-19. This is the largest public-private sector pay gap in the EU outside Portugal, Italy, Greece and Spain, where public sector pay is much lower than in Ireland. In the UK, which has a public service largely similar to our own in terms of age, qualification and education, the current public-private differential is 0.3% in favour of the private sector. 
At the point in the economic cycle immediately pre-COVID-19, Ireland was close to full employment. At that point in normal economies, one would expect the private sector pay to exceed public sector pay. 
ISME CEO Neil McDonnell said; 
‘We have no issue with good pay for good public services, but unfortunately, Ireland does not enjoy these good public services. The OECD pointed out in its February report on Ireland that our outcomes in Health, Justice and Education are sub-optimal internationally.’ 
Despite this, these are the sectors which produce most collective pay pressure. The Public Service Pay Commission reported in 2017 that almost no areas of the public service suffered recruitment or retention issues. Therefore, there is no economic, social or moral reason to persist with so high a differential between public and private sector pay. 
During the last recession, citizens rightly complained about the €64bn bailout given to our banking sector. The €105bn bailout of our public sector at that time is never mentioned, yet it is responsible for more than half of our current national debt. This debt burden will fall substantially on our children. 
In countries with more mature labour movements, such as Germany, trade unions faced with Ireland’s current economic circumstances would refuse a public sector pay increase even if it was offered. Germany’s wage restraint is the reason they have maintained high employment levels even through recessions. 
Nonetheless, ISME would give a guarded, conditional welcome to an increase in public sector pay at this time if it was subject to the following conditions:

  • A sectoral audit of all efficiencies previously agreed confirmed that these efficiencies were already achieved and in place.
  • Removal of all restrictive practices and demarcations
  • Agreement to a local redeployment of service personnel from low to high demand areas within 40 km
  • Equitable tax treatment by Revenue of imputed pension contributions of public service employees
  • The establishment of a permanent, standing public sector pay commission, similar to the Office of Manpower Economics in the UK