ECONOMIC INSIGHTS

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This is because the CSO’s approach goes beyond

educational attainments, qualifications and

profession. The CSO’s study suggests the publicprivate

pay gap is explained by differences in trade

union membership and nationality. Hence, the

CSO’s estimates of the underlying pay premium

are lower than those of the ESRI, ECB, European

Commission and other studies that chose not to

consider trade union membership or nationality as a

determinant of pay.

Therefore our view is that, at most, only half (20%)

of the pay gap can be explained by differences in

experience, age, education and qualifications. This

is probably an upper limit. In the United Kingdom,

public sector pay levels are set almost exactly in

line with the private sector despite sharing similar

characteristics to their counterparts in Ireland.

For example, the CSO’s estimates show that on

average trade union membership is associated with

10% higher pay. Therefore, in the CSO’s methodology,

a significant proportion of the pay gap is explained

not by membership of the public sector per se, but

rather by higher levels of trade union membership

within the public sector (79%) vis-à-vis the private

sector (19%). However, this is circular logic. Trade

union membership or nationality may help explain

the pay gap but clearly cannot justify higher pay for

similar roles in the public and private sectors.

In any case, these statistical estimates of the

underlying wage premium should be taken with

a ‘pinch of salt’. They are derived from statistical

models of how wages are determined in Ireland

alone. A recent European Commission paper takes

a broader view, finding that wages in Ireland were

exceptionally high compared with other European

countries even after accounting for differences in

workers’ characteristics. Furthermore, the European

Commission found that the pay premium of 20% in

Ireland was the largest across 26 European countries.

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