Advisors.ie

This weeks article is here, we looked at the difference between public and private pay using CSO figures. The unedited version is contained in the rest of this post.

We often hear that people in the public sector are overpaid. Typically the argument then turns towards the ‘fat cats’ and then quickly deteriorates into a ‘them’ vs ‘us’ debate, and depending on your employment type you take a certain side.

It would be far better to look at the facts first. A Central Statistics Office paper entitled ‘Investigating the Public Private Wage Gap’ is a must read if you are interested in this topic. Several key points must be made, first is that the ‘premium’ for working in the Public Sector is not actually at the top end where the highly paid workers operate. Rather it is at the low end, the very people that the unions trot out as ‘vulnerable’ are the ones getting the biggest benefit when compared to a similar job in the private sector.

And what’s more, no statistical study to date includes security of tenure or puts a valuation on one of the best pension benefit schemes known to mankind in the process. The absence of that comparison means we are not even getting a clear picture of how much better life is as a government employee than in a similar private sector job.

So if we take a hypothetical office administrator in both sectors, the one in the public sector earns more working for the state than they would working for a company and we don’t even factor in the inability to fire them or the gold plated retirement schemes.

The CSO has also published the figures for the first quarter of 2012 regarding public and private sector incomes. There are 1.1m people in the private sector workforce and 386,000 in the public sector. Both groups work approximately 31 paid hours a week, the weekly earnings vary with private sector coming in at about €620 versus the public sector at about €910.

This is a near 50% premium – and let us not forget that the majority of the public sector is not ‘highly paid’ if we are to believe the trade unions, perhaps that is true, but it shows that when averaging out it is even more true in the private sector. This difference has remained fairly constant since before Croke Park and ever since.

The next time you hear anybody say they don’t have it easy in the public sector, remind them that they would have it worse in the public sector and could be fired in the morning and have no guarantee of a pension from it.

The public sector needs to reform, why do we have a school year that was created in the mid-1800’s when summer break was really there to facilitate child labour in an agrarian society? Teachers ask for up to date computers, why don’t we see if they’d like up to date working calendars? Why do some people who get a house with their job in the Office of Public Works also get a travel allowance? The insanity seems unlimited.

What we should really do is offer all public sector workers 50% of any savings they can find in the first year their idea is implemented, with no cap on it. So if a Nurse finds a way to save €1,000,000 a year by doing something in a hospital a different way, then they should get €500,000 as an annual bonus, such a scheme creates no losers, rather it may limit savings – but this would identify savings that might not otherwise exist.

Hard to make happen? I doubt it, just set up an email address where people can send their ideas, then have somebody ring them to check it out further, the private sector would figure this out in two seconds.

So is this a public sector bash-fest? Hardly, because again, we have to look at the facts – Croke Park, warts and all, has delivered nearly €900m in savings, and with all of the chopping and changing there have been no strikes or discernible reductions in services.

Local authority spending has dropped by €735m between 2008 and 2012, their staff numbers have dropped 22% from 37,000 to 29,000 and again, no industrial action and no disruptions. The critics of local authorities often have several common traits. First is that I have yet to see this opinion from anybody who has run a city in the past, or had a staff count in the thousands to manage. This means their critique is largely based on personal interpretation of how things should work, rather than one where experience has shown different.

The private sector does the same thing, but they do it by firing a lot of people, then we all pick up the tab in different ways.

The actual workers are also different, education levels tend to be higher in the Public Sector, it is skewed by the presence of doctors, people with PhD’s and the like, that isn’t to say we don’t have a top class private sector, but we do have on which facilitates the majority of minimum wage workers.

We need to stop thinking about this as a nation divided along working castes, it’s too expensive and gets us nowhere, but we also need to be aware of the facts or we can be easily swayed by populism.