However, despite these cuts, Figure 4 shows that average pay in the public sector in 2016 was €47,400, just 4.2% below the 2009 peak of €49,500. A recent study by University College Cork economists found that the pay of the bottom 25% of income earners in the public sector actually rose by 7.4% 2 but fell by 4.9% for the top 25%. These figures highlight the positive impact of increments (automatic pay rises linked to years of experience) and various reliefs and allowances on public sector pay levels. Incomes have not fallen as sharply as the headline reductions under the FEMPI acts. The PSPC will have to judge calls for ‘pay restoration’ in light of these facts. Perhaps the most telling summary statistic is that the overall size of the public sector pay bill is expected to rise to €20.6 billion in 2017, a level last seen in 2008. This is despite total employment in the public sector currently at 368,100, down from a 427,300 peak in 2008. 3 Figure 4: Average annual earnings – public sector and total employment 55 €000s 50 45 40 35 30 25 20 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Public Sector Total Employment Source: Central Statistics Office; Department of Public Expenditure and Reform “Actual public sector pay levels have not been cut as sharply as the headline FEMPI measures suggest” 10 2 See ‘An Analysis of Public and Private Sector Earnings in Ireland, 2008-2013’ by Justin Doran, Noirin McCarthy and Marie O’Connor, School of Economics, University College Cork. 3 The Department of Public Expenditure and Reform indicates there were 298,200 full-time equivalents in the public sector at the end of 2015, down 7% from 320,400 in 2008.
■ ■ ■ DAVY | <strong>ECONOMIC</strong> <strong>INSIGHTS</strong> | PUBLIC SECTOR PAY – AVOIDING THE MISTAKES OF THE PAST ARE IRELAND’S PUBLIC SECTOR PAY LEVELS HIGH BY EUROPEAN STANDARDS? Average pay in Ireland is close to the European average. Figure 5 illustrates that annual gross earnings for a single person in Ireland at the average wage equalled €34,800 in 2015, 6% below the euro area average of €37,100. However, net earnings were 13% above. This highlights that the income tax burden for average and lower earnings is not actually that high but rises sharply for higher earners. Figure 5: Average annual gross and net earnings, single individual, no children, 100% of average earnings in 2015 60 €000s 50 40 30 20 10 0 Luxembourg Netherlands Germany Belgium Finland Austria France Euro Area Ireland Italy Spain Malta Greece Slovenia Portugal Latvia Estonia Slovakia Lithuania Gross Earnings Source: Eurostat Net Earnings Unfortunately, cross-country comparisons of public sector pay levels are rare. The most recent comprehensive study was by the European Commission in 2013. It found that Ireland’s publicprivate pay gap was relatively large at 33% compared with 10.5% on average across the euro area. The gap between public and private sector pay in Ireland was the sixth-largest across the euro area, only smaller than southern European countries such as Portugal, Cyprus, Italy and Greece. Eurostat does provide annual earnings data for European countries at the sectoral level. Table 3 illustrates average earnings for three sectors in which public sector workers are located. Notably, average earnings in Ireland’s public administration and defence (€51,700), education (€56,300) and health and social work (€46,400) are the highest across the range of euro area countries in Table 3 4 . 4 These sectors may contain some private sector workers, particularly in the human health sector. 11