ECONOMIC INSIGHTS

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WHAT SHOULD THE PUBLIC

SECTOR PAY COMMISSION

RECOMMEND?

We believe the PSPC must grasp the nettle of

acknowledging that public sector pay rates in

Ireland are high by international standards and

compared to the private sector. Therefore, any

successor to the next Lansdowne Road Agreement

should ensure the following:

ππ

ππ

ππ

Growth in public sector pay per employee

(including the positive impact of

increments) should at most only match pay

rises in the private sector.

The value of pensions should be included

in any comparison of public and private

sector pay.

Any planned multi-year pay rises must

be conditional on the performance of the

economy.

Ideally, the public/private pay gap should be allowed

to close over time. However, because the pay gap

is larger for lower-paid public servants, this will be

politically difficult to achieve. As a second-best

option public sector pay growth should be limited

to ensure the gap does not widen over time. In this

vein, some of the steam in the debate on public

sector pay could be ameliorated if a value is put on

public sector defined benefit pensions.

The Department of Finance has argued that wage

setting should be as flexible as possible. We agree.

Any multi-year agreements on pay must be made

conditional on the on-going performance of the Irish

economy and tax revenues. A flexible agreement

would be prudent given the risks posed by Brexit,

questions on the sustainability of corporate tax

revenues and the inherent volatility that is always

faced by a small open economy such as Ireland.

There is also a question on whether centralised

wage agreements for the public sector are

appropriate. In the UK there are separate processes

for different parts of the public sector which may

help prevent inappropriate ‘relativities’ between

sectors imposing an additional rigidity on pay.

“In this vein, some of the steam in the

debate on public sector pay could be ameliorated

if a value is put on public sector

defined benefit pensions.”

8

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