Its official : public sector pay per hour is 49% higher than private sector

martian1980 · 05-01-2011 11:13PM

noodler wrote: »

I haven't slagged you off. I was speaking to Muppet because I know him well from another forum.

Saying we are a low income tax country is one thing and to be fair, you'd want to have ignored the previous two budgets and newspaper for the last 18 months not to know it.

However saying RL feels the income tax in Ireland is low does not mean he favours raising it on the private sector alone - I mean have you ever heard anything like it?

The previous 2 budgets? The last budget hit everyone alright, but the one before was relatively light on the private sector, but knocked lumps out of the public sector with the pay cut. Ronan Lyons' review of the budget from december 2009 stated that "The worst Budget is out of the way only for public sector workers. For taxpayers in general, this was a let-off"

http://www.ronanlyons.com/2009/12/15/budget-2010-scorecard-minister-lenihan-gets-a-710/

noodler · 05-01-2011 11:22PM

martian1980 wrote: »

The previous 2 budgets? The last budget hit everyone alright, but the one before was relatively light on the private sector, but knocked lumps out of the public sector with the pay cut. Ronan Lyons' review of the budget from december 2009 stated that "The worst Budget is out of the way only for public sector workers. For taxpayers in general, this was a let-off"

http://www.ronanlyons.com/2009/12/15/budget-2010-scorecard-minister-lenihan-gets-a-710/

What on earth is your point here?

What I said was that Ireland is an undertaxed country in terms of income tax alone has been well pointed out by the Gov (MOF) in the last two budgets and is regularly mentioned in the media.

How/why does a Government intervene in the setting of wages in the private sector? - It doesn't have to.

Anyway - I think you may have misunderstood something you heard a long time ago but if you can say in two or three lines exactly what you think should happen with regards taxation and pay in this country then please do so.

ardmacha · 05-01-2011 11:32PM

Public Sector Wages increased out of all proportion over the last 15 years compared to private wages.

No they did not. As previously stated on this forum public sector pay rose ~66% from 1998 -2008, while private sector pay rose ~71% in the same period.

There isn't much evidence to suggest that private sector wages have fallen the 14% or so that PS wages have since then.

martian1980 · 05-01-2011 11:35PM

noodler wrote: »

What on earth is your point here?

What I said was that Ireland is an undertaxed country in terms of income tax alone has been well pointed out by the Gov (MOF) in the last two budgets and is regularly mentioned in the media.

How/why does a Government intervene in the setting of wages in the private sector? - It doesn't have to.

Anyway - I think you may have misunderstood something you heard a long time ago but if you can say in two or three lines exactly what you think should happen with regards taxation and pay in this country then please do so.

Right. Here's Muppet's original quote which you took exception to:

Muppet wrote:

To reduce this cost of living it's only common sense that private sector wages must be reduced. If this is done by taxation all sectors will be equally affected. This would increase our competitiveness and aid recovery

I was making the point that if done by taxation - which affects everyone equally - then there's room for doing it, seeing as our income tax rates are comparatively low. In terms of the last 2 budgets, the public sector got walloped in the first one, while everyone (public and private sector) got a kicking in the second.

People saying that public sector workers are being selfish for disagreeing with further paycuts, since the alternative is tax rises, are ignoring the fact that our tax rates are still very low.

As i said in an earlier post, further reductions in the public paybill have already been announced through the reductions in pension tax credits, which will hit public sector workers harder than private sector workers. In addition, a further 10% paycut looks likely unless the unions & management can seriously pull a rabbit out of the hat on CPA savings.

Flex · 05-01-2011 11:44PM

ardmacha wrote: »

No they did not. As previously stated on this forum public sector pay rose ~66% from 1998 -2008, while private sector pay rose ~71% in the same period.

There isn't much evidence to suggest that private sector wages have fallen the 14% or so that PS wages have since then.

Why is it the PS pay premium nearly tripled (going from 8% to 23%) between 2003 and 2006 then and was at 26% in 2009? ESRI report by the way

martian1980 · 05-01-2011 11:51PM

Flex wrote: »

Why is it the PS pay premium nearly tripled (going from 8% to 23%) between 2003 and 2006 then and was at 26% in 2009? ESRI report by the way

because it had fallen back the other way in the preceding 7-8 years. Public sector workers in the early noughties were leaving public their jobs in droves for private sector jobs. It's a pity you couldn't have told them all that there was still an 8% premium. The pay increases between 03 and 06 addressed this.

noodler · 06-01-2011 12:31AM

ardmacha wrote: »

There isn't much evidence to suggest that private sector wages have fallen the 14% or so that PS wages have since then.

Nope, for several reasons:

1) Private Sector Wages were not directly dependent on exchequer tax returns and so did not need to fall when our tax base collapsed

2) Stop acting like the Pension Levy is a wage decrease - it is not - it is simply ensuring that PS workers pay for their own pensions.

3) The Private sector fires people or reduces their wages when there is a recession - not so in the Public Sector (wage decreases dragged kicking and screaming).

4) Average Private Sector Wages began to decrease almost as soon as the crisis began - PS wages continued (continue?) to remain high well into the crisis

http://www.ronanlyons.com/2009/02/04/public-sector-pay-in-ireland-the-e50000-question-its-not-that-difficult/

http://www.ronanlyons.com/2009/07/13/public-sector-versus-private-sector-pay-update/

noodler · 06-01-2011 12:41AM

Ronan Lyons

First, a general comment about public sector pay cuts. This can’t possibly be that much of a surprise to anyone in the public sector. After all, this is what they signed up to in 2001, with benchmarking. Benchmarking may have been an incredibly expensive way to do it – costing the economy €1bn+ every year and counting – but it did establish a principle in public sector wages in Ireland. That principle is that trends in public sector wages must mirror those in the private sector. It’s incredibly cheeky of those happy to have the principle applied in the good times to argue that they shouldn’t have to ‘bear the brunt’ of having the same principle applied in the bad times.
Now for the one-slider!

And in true consultant style, three key points from the above graph:
Lest we forget the most obvious, in every year of the series, public sector workers were paid more per year than their private sector counterparts*. 30% more on average! (There may be perfectly legitimate reasons for this, for example average experience/years worked may be higher, responsibilities may be greater… but a priori, who knows?)

As you can see, the gap has widened, not narrowed over the decade. In fact, in euro terms, it widened 8 years out of 10! And after the two years of greater private sector increases (prizes for eyesight if you can spot them on the graph), there were huge increases in public sector pay the following year.

Public sector pay is at least five years ahead of private sector pay. What public servants earned in 2003 took their private sector counterparts until 2008 to earn (in fact, they’re not even there yet, another €500 or so to go!).

With the Live Register now rocketing towards 400,000 and private sector wages now stagnant, bonuses disappearing, total earnings in the private sector are falling. Therefore, according to the principle of benchmarking, so must public sector wages. As they are paid €50,000 on average, compared to average wages of less than €38,000 in the private sector, this won’t be the biggest economic calamity to befall Ireland this year. Now, can we please incorporate this knowledge into our social dialogue?

ardmacha · 06-01-2011 12:43AM

Stop acting like the Pension Levy is a wage decrease - it is not - it is simply ensuring that PS workers pay for their own pensions.

Of course it is a pay decrease and it has been described as such by the Minister of Finance.

not so in the Public Sector (wage decreases dragged kicking and screaming).

People rarely put themselves forward for pay decreases. Especially in this case where no rational basis for the pay cuts was ever put forward by the government. They were never explicitly related to GDP/GNP, previous increases, pay levels in the economy, deflation or any other reasonable basis.

kaiser sauze · 06-01-2011 12:49AM

ardmacha wrote: »

Of course it is a pay decrease and it has been described as such by the Minister of Finance.

It is a higher contribution to a generous retirement scheme that was vastly underfunded with a looming demographic timebomb that will make funding it under the old contributions impossible.

noodler · 06-01-2011 12:51AM

ardmacha wrote: »

Of course it is a pay decrease and it has been described as such by the Minister of Finance.

When most private sector workers got their wages decreased the proceeds were not going towards a generous pension.

ardmacha wrote: »

People rarely put themselves forward for pay decreases. But in this case no rational basis for the pay cuts was ever put forward by the government. They were never explicitly related to GDP/GNP, previous increases, pay levels in the economy, deflation or any other rational basis.

That Turkeys don't vote for Xmas is fine.

No rational basis? You can not be serious?

Addressing each of those in order:

1) GDP/GNP - no not directly, nobody was saying a quick snip in PS wages would increase GDP. (I could spin some lark about using the €1bn for investment purposes but thats way too obscure)

2) Previous Increases: I believe the Minister and many other have said the situation in public finances has become unsustainable.

3) Pay levels in the economy: I am absolutely certain it has been pointed out some workers have had their wages reduced to social welfare levels through unemployment. Moreover, some companies/professions use PS wages as a benchmark.

4) Deflation: The CPI decreased by 4.5% last year and is due to decrease by a further 0.75% this year (to be frank - if you ignored the banks hiking their variable rates for mortgage repayments this figure would be even more negative). Source if the ESRI QEC by the way http://www.esri.ie/UserFiles/publications/QEC2010Aut_ES.pdf

(P4) but obviously it is straight from the CSO in the first instance.

Anyway, off to bed - I am luckt enough to be able to have to get up for work tomorrow.

noodler · 06-01-2011 12:55AM

kaiser sauze wrote: »

It is a higher contribution to a generous retirement scheme that was vastly underfunded with a looming demographic timebomb that will make funding it under the old contributions impossible.

It may well still be - I'd have to look into it deeper otherwise I would be taking press reports as fact.

I vaguely remember something damning in the Comptroller and Auditor General's report in the summer.

ardmacha · 06-01-2011 01:13AM

It is a higher contribution to a generous retirement scheme that was vastly underfunded

The pension levy does not go into a pension fund nor does payment of it entitle people to a pension. The government may choose to say that it is spending the money saved from the paycut on pensioners, but whatever they spend the savings on it is a paycut. Government expenditure is reduced and the wages received by employees is reduced.

No rational basis? You can not be serious?

Of course I am serious and I have argued this point before on numerous occasions. The government could have said that GNP is now at 2005 levels, so pay will be at 2005 levels, or have some similar form for relationship. This did not happen. If someone is going to say there should be a paycut or justify previous paycuts then it is reasonable to require a clear explanation of why the pay cut is necessary. Instead the government engaged in generalities and the type of biased presentation of data we see on this forum.

This lack of data is deliberate and is designed to confuse certain issues.
- public pay did not rise more than private pay in the boom
- while private sector pay has declined in some sectors, in others it has not
- public pay premia are highest at low levels, whereas the intention is to have the lowest cuts for people at this level.

kaiser sauze · 06-01-2011 01:20AM

ardmacha wrote: »

The pension levy does not go into a pension fund nor does payment of it entitle people to a pension. The government may choose to say that it is spending the money saved from the paycut on pensioners, but whatever they spend the savings on it is a paycut. Government expenditure is reduced and the wages received by employees is reduced.

Your original contribution was not going into a "pension fund"!

You don't get it, you are serving your masters well!

noodler · 06-01-2011 01:21AM

ardmacha wrote: »

Of course I am serious and I have argued this point before on numerous occasions. The government could have said that GNP is now at 2005 levels, so pay will be at 2005 levels, or have some similar form for relationship. This did not happen. If someone is going to say there should be a paycut or justify previous paycuts then it is reasonable to require a clear explanation of why the pay cut is necessary. Instead the government engaged in generalities and the type of biased presentation of data we see on this forum.

Oh sweet Jesus. Public Finances, Public Finances, Public Finances.

Don't be worrying yourself about what the GDP was - it isn't important for the discussion.

Where have you ever heard an argument that Public Sector wages should increase in line with GDP?

ardmacha wrote: »

This lack of data is deliberate and is designed to confuse certain issues.
- public pay did not rise more than private pay in the boom

30% higher than Private Sector wages through the boom - consult the graph I provided.

ardmacha wrote: »

- while private sector pay has declined in some sectors, in others it has not

So? Again Public Finances is king - we can't afford it.

Anyway, thats the beauty of a private sector it pays what it can afford, if some sectors could afford to pay their staff more then why should the Government care?

The average wage was decreasing and people were losing their jobs (please don't forget that part, somebody being forced out of the labour force matters in this discussion).

ardmacha wrote: »

- public pay premia are highest at low levels, whereas the intention is to have the lowest cuts for people at this level.

Something we agree on - but I don't advocate the lazy approach the Government took to reduce the wages - it should have been far more surgical rather than a blunt % cut.

I just feel the overall pay bill should be reduced.

kaiser sauze · 06-01-2011 01:21AM

noodler wrote: »

It may well still be - I'd have to look into it deeper otherwise I would be taking press reports as fact.

I vaguely remember something damning in the Comptroller and Auditor General's report in the summer.

I never said the increased contribution was sufficient to cover the timebomb.

ardmacha · 06-01-2011 01:36AM

Don't be worrying yourself about what the GDP was - it isn't important for the discussion.

GNP (more than GDP) is a measure of the ability of the economy to support public services. The Public finances should reflect the GNP. If GNP is similar to 2005 and the public finances are not as good as in 2005 then the tax system should be changed to achieve a similar take from the economy as in 2005 (which has happened to some extent).

30% higher than Private Sector wages through the boom - consult the graph I provided.

I stated that PS wages did not rise more than private sector wages in the boom. You reply with the irrelevant information that PS wages were 30% higher. Precisely the type of ignoring the point that characterises this debate.

Anyway, thats the beauty of a private sector it pays what it can afford, if some sectors could afford to pay their staff more then why should the Government care?

People should get about the same reumeration in whatever sector they work, or do you not agree with this? There is no advantage to society to have all the talented people leave the public sector for better paid private sector ones.

martian1980 · 06-01-2011 02:36AM

noodler wrote: »

Stop acting like the Pension Levy is a wage decrease - it is not - it is simply ensuring that PS workers pay for their own pensions.

It's definitely a wage decrease because:

1. if it was a levy towards your public sector pension, it would only be levied on your basic salary, on which your pension is based. The "pension levy" is also applied to overtime payments, which do not influence your pension. That makes it a straight pay cut.
2. the fact that it reduces your pay without conferring any additional benefit makes it a pay cut.
3. if it was imposed around the time of the creation of the national pension reserve, you could argue that the money was being used to fund part of the state pension bill, but it wasn't.

It's worth noting that many staff in large private sector companies in Ireland are also on defined benefit pensions, many of which entitle staff to retire on 2/3 salary. The bank staff voted to accept a change to defined contribution schemes for new entrants in the early noughties when the celtic tiger was roaring away. They were given financial incentives to accept. It would be difficult to argue that it was necessary to move from DB to DC at the time cos the banks couldn't afford it. I wonder why they moved over voluntarily? I suppose it wasn't the last time that bank employees acted in a short-sighted manner.

noodler wrote: »

Anyway, off to bed - I am luckt enough to be able to have to get up for work tomorrow.

I hope that being in work doesn't stop you from contributing more high-calibre posts at the same rate as you did today

martian1980 · 06-01-2011 02:40AM

kaiser sauze wrote: »

Your original contribution was not going into a "pension fund"!

You don't get it, you are serving your masters well!

I don't think that you 'get' that he was stating the reasons why it was a pay cut and not a pension levy in response to noodler's post.

kaiser sauze · 06-01-2011 03:13AM

martian1980 wrote: »

I don't think that you 'get' that he was stating the reasons why it was a pay cut and not a pension levy in response to noodler's post.

You do not get it either.

You are trying to back up the claim that a higher contribution, into a fund that never existed in the first place, towards an unsustainable pension entitlement is a pay cut?

Good one.

martian1980 · 06-01-2011 09:41AM

kaiser sauze wrote: »

You do not get it either.

You are trying to back up the claim that a higher contribution, into a fund that never existed in the first place, towards an unsustainable pension entitlement is a pay cut?

Good one.

I gave reasons why it is a paycut and not a levy, one of which was that no fund was created for the 'levy' to go into. If you want to start talking about sustainability instead then that's a separate issue. DB pensions are not somehow unique to Ireland, they've existed in lots of countries for well over a hundred years. If age demographics are making them more expensive then you deal with that by raising the retirement age. In fact, you can deal with it however you like, but DB pensions are not some unique Irish PS perk. They were the norm until very recently. The pension levy is a paycut. Also, regarding sustainability, I see that last year was a great year for pension funds - maybe our pension reserve would be performing well and making our pension commitments more affordable if we didn't have to throw it all into failed private sector banks.

Gumbo · 06-01-2011 09:49AM

kaiser sauze wrote: »

You do not get it either.

You are trying to back up the claim that a higher contribution, into a fund that never existed in the first place, towards an unsustainable pension entitlement is a pay cut?

Good one.

if it looks like a paycut, and smells like a paycut, i wouldnt be too surprized to find out that it actually was a paycut.............

fliball123 · 06-01-2011 10:23AM

noodler wrote: »

Hmm. No, Public Sector Wages increased out of all proportion over the last 15 years compared to private wages. When the extra revenue fell away the wages had to / have to fall.

I know you aren't really as dense as you make out Muppet so I'll ignore your hilarious thought of putting extra tax on the private sector - go onto Irisheconomy.ie and post that in one of the comments sections and ask "why shouldn't we do this?" - I'll get the popcorn.

Average Private Sector wages, despite not increasing by the same level as the public sector, were the first to fall - they have adjusted all on their own - The PS ones had to be dragged kicking and screaming.

The problem is that the P.S still see bankers getting bonuses and Oleary Ryan Air boss still making massive profits..and dont realise that about 80% of the private sector have taken deep cuts and a fair % laid off...But as I said before the P.S wage needs to be cut not natural wastage which just takes the burden off the p.s wage bill and shifts it to either social welfare or pension...its almost the same as anglo shifting there debts to another bank...

But keep touting it P.S workers no doubt if I was working there I would be fighting my corner but the problem is no gov until dame enda has the balls to tackle you and when he gets in he will be held accountable for reform in the gov and p.s with I think a 10% cut in pay accross the board he touted...Its not that bad...

fliball123 · 06-01-2011 10:27AM

noodler wrote: »

I haven't slagged you off. I was speaking to Muppet because I know him well from another forum.

Saying we are a low income tax country is one thing and to be fair, you'd want to have ignored the previous two budgets and newspaper for the last 18 months not to know it.

However saying RL feels the income tax in Ireland is low does not mean he favours raising it on the private sector alone - I mean have you ever heard anything like it?

I dont get the low tax ecconomy I mean after my tax come out I am paying well over half my wage on tax not too mention stelt taxes, road tax, fuel tax, new property tax, water tax...how are we fcuking low tax.....

The gov has produced figures saying that we were nearly 3/4s of a billion over with our taxes due to exports...unfortunately the income side of things was well down...Anyone care to guess why...

2 reasons

1 people being laid off and cut in both private and public sector (bar the last budget)

2 people who have been taxed too much and cant afford to live in this country and have emigrated..

As I say I am on a very good wage and I am considering leaving as I am being squeezed on all sides and as I stated only people left will be the public sector...Dont know who will be paying your wages do

Riskymove · 06-01-2011 10:29AM

noodler wrote: »

30% higher than Private Sector wages through the boom - consult the graph I provided.

well apart from the whole issue about the comparison of the two averages, which has already been done to death, I would point out that the graph suddenly decides to stop at 2008 and a view of how the last two years have impacted might have been interesting.

I would suggest that a graph comparing lets say the finance and incurance sector with the civil service might show a different story over the same period

as mentioned by others its clear that both averages rose significantly over the period

Something we agree on - but I don't advocate the lazy approach the Government took to reduce the wages - it should have been far more surgical rather than a blunt % cut.

I just feel the overall pay bill should be reduced.

the over pay bill has been reduced by billions and continues to be reduced

as mentioned already the reductions are going to be seen in the net cost this year predominantly due to the nature of the changes

fliball123 · 06-01-2011 10:30AM

martian1980 wrote: »

The previous 2 budgets? The last budget hit everyone alright, but the one before was relatively light on the private sector, but knocked lumps out of the public sector with the pay cut. Ronan Lyons' review of the budget from december 2009 stated that "The worst Budget is out of the way only for public sector workers. For taxpayers in general, this was a let-off"

http://www.ronanlyons.com/2009/12/15/budget-2010-scorecard-minister-lenihan-gets-a-710/

and once again you completely ignore the income tax figures which were down a record low from 2008 to 2009 and down again in 2010 due to private sector wages being cut and people in the private sector being laid off...Yeah so relatively light in what regards. Keep spinning there kid

fliball123 · 06-01-2011 10:31AM

ardmacha wrote: »

No they did not. As previously stated on this forum public sector pay rose ~66% from 1998 -2008, while private sector pay rose ~71% in the same period.

There isn't much evidence to suggest that private sector wages have fallen the 14% or so that PS wages have since then.

what about income tax take by the gov coming right down over the last 3 years...does this not show that the majority of people have either been cut, laid off or left the country????

Even do Taxes have increased over the last 2/3 budgets???

Spin again there

fliball123 · 06-01-2011 10:33AM

martian1980 wrote: »

Right. Here's Muppet's original quote which you took exception to:

I was making the point that if done by taxation - which affects everyone equally - then there's room for doing it, seeing as our income tax rates are comparatively low. In terms of the last 2 budgets, the public sector got walloped in the first one, while everyone (public and private sector) got a kicking in the second.

People saying that public sector workers are being selfish for disagreeing with further paycuts, since the alternative is tax rises, are ignoring the fact that our tax rates are still very low.

As i said in an earlier post, further reductions in the public paybill have already been announced through the reductions in pension tax credits, which will hit public sector workers harder than private sector workers. In addition, a further 10% paycut looks likely unless the unions & management can seriously pull a rabbit out of the hat on CPA savings.

it hit both public and private...and yet the public sector pension will still be far supperior than anything in the private sector

fliball123 · 06-01-2011 10:44AM

kceire wrote: »

if it looks like a paycut, and smells like a paycut, i wouldnt be too surprized to find out that it actually was a paycut.............

So all my road/car tax goes on the road eh yeah come up out of it ...You are paying a small contribution towards a really good pension get over it...You should all be made provide fully for your own pensions

Riskymove · 06-01-2011 10:45AM

fliball123 wrote: »

what about income tax take by the gov coming right down over the last 3 years...does this not show that the majority of people have either been cut, laid off or left the country????

Even do Taxes have increased over the last 2/3 budgets???

Spin again there

see the big picture though

the PS paycut in 2010 would have resulted significantly to the decrease in the income tax take

330,000 people had wages reduced and therefore paid less tax

as would the reduction in PS numbers as pensioners would pay less tax too

Its official : public sector pay per hour is 49% higher than private sector

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