Slashing Public Sector Pay

rodento

Just wondering what would happen to the false and actual ecomany if you slashed the public sector pay/pension including semi's and the social welfare by another 30%.

Thinking in terms of loan defaults, huge drop in tax take, collapse of feeder industries like creche's and resturants etc

Would it mean that people could no longer afford to work, how would they get rid of their cars if they could no longer afford to run them:eek:

Would utility companies survive with people no longer been able to afford to pay for heat/electricity...

Not forgeting the effects on rents and mortgages

gigino

If social welfare was cut by 30% it would still be higher than in the north.

If public service pay was cut by 30% gross the effect after tax would be a lot smaller.

Sure it would have an effect but even if gross average public sector pay was cut by 30%, it would still be higher than in our neighbours the UK....and they still have creches, restaurants, cars...

Cutting public sector pay by 30% here would bring it close to private sector pay, which is more like the norm in most countries.

When the IMF / EU do cut government expenditure, it will be those on 80,000 and more who will suffer most.

Public sector pensions should be capped at say 40 grand, given the state of the economy. If people in the public sector want a bigger pension than that, they should save for it themselves. Its absurd some public sector retirees getting an annual pension of 120,000 and more.

hmmm

I don't disagree that the rates have to be cut, but an immediate cut would be devastating both for individuals and the entire economy. You simply cannot cut the pay of hundreds of thousands by 30/40% overnight, and cut pensions and social welfare by 30/40% in the same way without massive social disruption.

It can (and should) be done over 4 or 5 years.

markpb

gigino wrote: »

Sure it would have an effect but

The crux of the problem with your post.

If you slash the wages of a big chunk of the country, mass defaults on mortgages will be the first outcome. We would end up with an even bigger hole in the banks balance sheets which means we would have to borrow more money to fill that hole. Then you'd have the sudden drop in overall market activity as people have nothing to spend.

I agree that government expenditure needs to fall a lot further but no-one has been able to suggest a realistic way of doing that.

RichardAnd

hmmm wrote: »

I don't disagree that the rates have to be cut, but an immediate cut would be devastating both for individuals and the entire economy. You simply cannot cut the pay of hundreds of thousands by 30/40% overnight, and cut pensions and social welfare by 30/40% in the same way without massive social disruption.

It can (and should) be done over 4 or 5 years.

I agree with this. OP, the problem here is that wages in Ireland (public AND private) were allowed to get out of control. When this was combined with the low taxes of the boom, it left alot of disposable income in people's pockets which led to one simple thing...inflation.

Even today, recession or nay, most people still earn a very decent wage so prices haven't dropped by any significant amount. Hence, we are left with a situiation where an immediate cut of 40% to public sector wages would be a disaster in that it would mean thousands of people would be unable to afford to live until prices re-adjusted, which wouldn't happen over night.

Also, it's worth mentioning that the belief that every public servant is 40-50% better off than private sector counter parts is misleading. I worked in the public sector myself and I'm familiar with the pay scales. At the lower end, at least, the pay isn't that much different than it would be for equivalent private sector jobs.

So what is the solution? Well there's no simple one other than an attempt to pull wages down over a few years. A single, swift cut to public wage might have to happen, I hope not, but if it does it will not be good for the economy at large but to be honest, it may be unavoidable.

gigino

markpb wrote: »

If you slash the wages of a big chunk of the country, mass defaults on mortgages will be the first outcome.

A very big chunk of the country is already on much lower wages than the cossetted public service. As I said "When the IMF / EU do cut government expenditure, it will be those on 80,000 and more who will suffer most.
Public sector pensions should be capped at say 40 grand, given the state of the economy. If people in the public sector want a bigger pension than that, they should save for it themselves. Its absurd some public sector retirees getting an annual pension of 120,000 and more. " Public servants higher up will ( rightfully) bear the brunt of the wage cuts. If those on 80, 100, 120k a year etc are cut most will not be defaulting on their mortgages of their principal residences. Some public servants with multiple homes may lose some - tough.

The current situation where the average retiring public servant gets a tax free gratuity of 18 months finishing salary - big enough to buy the guts of a couple of new apartments in parts of the country ( you can see them on daft.ie for 40k ) , in addition to our pension, is not sustainable considering the state of the economy / the IMF here etc. Prices have fallem , public service pensions need to too.

Head The Wall

RichardAnd wrote: »

I worked in the public sector myself and I'm familiar with the pay scales. At the lower end, at least, the pay isn't that much different than it would be for equivalent private sector jobs.

You're wrong about that, the last ESRI report showed the greatest difference at the lowest paid end. It was around 35% at the bottom and 8-10% at the top end.

These so called lower paid paper shufflers are also the ones first in line to get their pay reinstated as per the CPA when they should be getting cut the most to bring them in line with their private sector counterparts

20Cent

If you cut the PS and welfare by 30% then society as we know it would come to an abrupt halt.

Slash the pensions.

RichardAnd

Head The Wall wrote: »

You're wrong about that, the last ESRI report showed the greatest difference at the lowest paid end. It was around 35% at the bottom and 8-10% at the top end.

These so called lower paid paper shufflers are also the ones first in line to get their pay reinstated as per the CPA when they should be getting cut the most to bring them in line with their private sector counterparts

A quill pusher, as you say, in the public service will get about 22k a year starting off. This isn't much different from what an administrator will get in the private sector. Granted, pay scales allow that to go up but 35% seems excessive.

Don't suppose you have a link to that report?

paddy0090

20Cent wrote: »

If you cut the PS and welfare by 30% then society as we know it would come to an abrupt halt.

Halt . Destructive as it would be society would adapt and get on with it. The second round effects would be hugely destabilizing particularly in rural areas because of decentralisation. But the cities(particularly Dublin) would manage.

Do you really think the effect would be much different if you did it over a 3 year period?

20Cent

paddy0090 wrote: »

Halt . Destructive as it would be society would adapt and get on with it. The second round effects would be hugely destabilizing particularly in rural areas because of decentralisation. But the cities(particularly Dublin) would manage.

Do you really think the effect would be much different if you did it over a 3 year period?

The cops would be out helping the PS and unemployed fire the petrol bombs at the Dail.

paddy0090

20Cent wrote: »

The cops would be out helping the PS and unemployed fire the petrol bombs at the Dail.

Only if the dish runs away with the spoon!

Head The Wall

RichardAnd wrote: »

A quill pusher, as you say, in the public service will get about 22k a year starting off. This isn't much different from what an administrator will get in the private sector. Granted, pay scales allow that to go up but 35% seems excessive.

Don't suppose you have a link to that report?

http://www.esri.ie/publications/latest_publications/view/index.xml?id=2864

eric hoone

gigino wrote: »

A very big chunk of the country is already on much lower wages than the cossetted public service. As I said "When the IMF / EU do cut government expenditure, it will be those on 80,000 and more who will suffer most.
Public sector pensions should be capped at say 40 grand, given the state of the economy. If people in the public sector want a bigger pension than that, they should save for it themselves. Its absurd some public sector retirees getting an annual pension of 120,000 and more. " Public servants higher up will ( rightfully) bear the brunt of the wage cuts. If those on 80, 100, 120k a year etc are cut most will not be defaulting on their mortgages of their principal residences. Some public servants with multiple homes may lose some - tough.

The current situation where the average retiring public servant gets a tax free gratuity of 18 months finishing salary - big enough to buy the guts of a couple of new apartments in parts of the country ( you can see them on daft.ie for 40k ) , in addition to our pension, is not sustainable considering the state of the economy / the IMF here etc. Prices have fallem , public service pensions need to too.

There is a generation of policy makers and their peers making off like flynn with our euros, look at the previous cabinets' pay-offs- TAX FREE. Any prospect of the govt stopping his scandal? Turkeys and christmas come to mind. But it's urgent because younger public servants will pay for this with huge pay cuts in the near future.

bamboozle

I'd settle for a 50% pay cut on income over 100k for state employees or those earning state pensions and an complete overhaul of salaries and pensions for new entrants to the public sector.

ie if someone, lets just say a hapless former Financial Regulator called Pat is forced to retire as his inability to do the job he was paid for was badly exposed, is currently earning a state pension of €144k, this would be cut down to €122k

if a secretary general of a govt dept was earning €230k this would be cut to €165k

i'm sure those in the public sector on salaries lower than 100k would be quiet happy to see the higher earners being cut.

Riskymove

bamboozle wrote: »

I'd settle for a 50% pay cut on income over 100k for state employees or those earning state pensions and an complete overhaul of salaries and pensions for new entrants to the public sector.

......i'm sure those in the public sector on salaries lower than 100k would be quiet happy to see the higher earners being cut.

so someone on 95k gets no cut?

most public servants are at the other end of the spectrum so i really dont think much be achieved, especially taking into account taxation etc

deise blue

Head The Wall wrote: »

http://www.esri.ie/publications/latest_publications/view/index.xml?id=2864

That report would appear to be out of date as it covers the 3 year period to 2006 & as such does not include the unilateral pay cuts imposed more recently.

Is there no more recent , relevant report ?

gigino

Riskymove wrote: »

most public servants are at the other end of the spectrum so i really dont think much be achieved, especially taking into account taxation etc

Public sector pay has doubled over the past 10 years, so there is room and considerable savings to be made by meaningful cuts. ...not just in pay but in pensions too. As said brefore, The current situation where the average retiring public servant gets a tax free gratuity of 18 months finishing salary - big enough to buy the guts of a couple of new apartments in parts of the country ( you can see them on daft.ie for 40k ) , in addition to our normal public service annual pension, is not moral, decent or sustainable considering the state of the economy / the IMF here etc.

Laminations

Could someone please post 3 very simple descriptive stats:

The mean, median and mode of pay in the public sector.

Riskymove

gigino wrote: »

Public sector pay has doubled over the past 10 years, so there is room and considerable savings to be made by meaningful cuts. ...not just in pay but in pensions too. As said brefore, The current situation where the average retiring public servant gets a tax free gratuity of 18 months finishing salary - big enough to buy the guts of a couple of new apartments in parts of the country ( you can see them on daft.ie for 40k ) , in addition to our normal public service annual pension, is not moral, decent or sustainable considering the state of the economy / the IMF here etc.

hmmm, something very familiar about this

anyway I was responding to someone else

gigino

Riskymove wrote: »

anyway I was responding to someone else

you had a paragraph statement
"most public servants are at the other end of the spectrum so i really dont think much be achieved, especially taking into account taxation etc "

My point is a lot could be achieved. Despite the cuts over the past year or two the public sector pay bill has doubled for the taxpayer over the past ten years.

Riskymove

gigino wrote: »

you had a paragraph statement
"most public servants are at the other end of the spectrum so i really dont think much be achieved, especially taking into account taxation etc "

and that was in response to an idea that cuts only happen above €100k

I dont think that would achieve much

Despite the cuts over the past year or two the public sector pay bill has doubled for the taxpayer over the past ten years.

the pay bill doubled, wages did not neccessarily double

also I would argue about 'despite'

the pay bill doubled but has been and is coming down over the last couple of years, and other measures (e.g. levies, taxes) dont affect the gross pay bill so are often overlooked

Riskymove

Laminations wrote: »

Could someone please post 3 very simple descriptive stats:

The mean, median and mode of pay in the public sector.

the only published stat is the average released by CSO

I think its around €45k following the paycuts

Its also been mentioned a few times that a third of PS earn 40k or less and two thirds €60 or less (before paycuts)

gigino

Riskymove wrote: »

I think its around €45k following the paycuts

average public sector pay is actually 47k per year www.cso.ie


pay in the semi-states, which are really part of the government anyway you could say, is considerably higher, as was highlighted a week or 2 ago , both in the national media as well as on boards.ie

north of the border average public sector pay is between 22 and 23 k per year stg.

Riskymove

gigino wrote: »

average public sector pay is actually 47k per year www.cso.ie

thanks, obviously I was miles off:rolleyes:

pay in the semi-states, which are really part of the government anyway you could say,

you can argue that they are 'part of govt' if you like, what is important in these threads is that they dont form part of the PS pay bill

Dinge

The pension levy's not included in those figures though, is it?

Head The Wall

deise blue wrote: »

That report would appear to be out of date as it covers the 3 year period to 2006 & as such does not include the unilateral pay cuts imposed more recently.

Is there no more recent , relevant report ?

There has been one paycut not paycuts. It was only a few percent and the PS have continued receiving increments since then.

Laminations wrote: »

Could someone please post 3 very simple descriptive stats:

The mean, median and mode of pay in the public sector.

I can't provide reports and data that isn't there. It's essentially up to the CSO, ESRI or whatever useless govt body to do so. When they can't even come together and have a shared database there is zero chance of ever getting concise correct data.

Dinge wrote: »

The pension levy's not included in those figures though, is it?

The pension levy is a deduction and has nothing to do with Gross pay, the CSO reports also don't factor in pension contributions private sector workers make.

angelfire9

gigino wrote: »

average public sector pay is actually 47k per year www.cso.ie


pay in the semi-states, which are really part of the government anyway you could say, is considerably higher, as was highlighted a week or 2 ago , both in the national media as well as on boards.ie

north of the border average public sector pay is between 22 and 23 k per year stg.

Firstly the €47k figure quoted is from 2008 correct?
Therefore is inaccurate as it does not take into consideration the reduction in gross pay for public servants in budget 2009

Can you show a source for the NI figures please?

rodento

Question isn't how overpaid the public sector is, more the effects on the general society if you cut the pay of 500,000 people + by over 7'000.

beeno67

deise blue wrote: »

That report would appear to be out of date as it covers the 3 year period to 2006 & as such does not include the unilateral pay cuts imposed more recently.

Is there no more recent , relevant report ?

In todays mini budget or what ever you want to call it, Noonan said the cut in PRSI for those earning under €18,500 would affect 600,000 workers. So I take it from that that 600,000 workers (about one third of the workforce) earn less than €18500 a year.