Dáil Éireann debate -
Wednesday, 25 Jan 1995

Vol. 448 No. 1

Written Answers. - ISME Report.

Máirín Quill

Question:

37 Miss Quill asked the Minister for Finance whether his attention has been drawn to a recently published ISME report (details supplied) on divergence between income movements in the public and private sectors since 1987; and if he will make a statement on the matter. [1575/95]

Minister for Finance (Mr. Quinn)

I am aware of the report referred to by the Deputy. There are a number of points on which I wish to comment.

First, pay comparisons between an average industrial worker and an average Government service employee can never be strictly valid in that like is not being compared with like. Staff paid from the Exchequer are typically highly-trained groups like teachers, nurses and gardaí operating at a level of skill relatively higher than that of a private sector worker at or about the average industrial wage.

Second, as explained in reply to Parliamentary Question No. 53 of 21 April 1994 by Deputy O'Malley, there is a technical problem with the earnings figures used in the ISME report, deriving from methodology such as that used in the OECD Economic Survey Series. For the purposes of that exercise, an "average" public service figure is obtained by dividing the Exchequer Pay Bill by the average numbers employed. For a variety of technical reasons, which are explained in detail in the reply referred to earlier, averages produced in this fashion must be treated with caution.

Third, any evaluation of comparative trends in pay is, by definition, sensitive to the time period examined. The starting date used in the ISME report, 1987, reflects a point in time when public service pay rates were widely acknowledged to have fallen seriously behind those in the private sector. This manifested itself in a series of arbitration findings recommending increases for the main marker groups of public servants originating to a large extent in pay awards in the private sector in the early to mid 1980's. To their credit, arrangements were negotiated with the public service unions which had the effect of deferring implementation of those awards, cushioning the impact on the Exchequer, over a period which commenced two years later in 1989 and did not end until last year, 1994.

Trends over time in comparative developments in public service and private sector pay were,inter alia, the subject of a special comment by the National Economic and Social Council (NESC) in its report of November 1993 entitled A Strategy for Competitiveness, Growth and Employment. That report (pages 134 and 135) confirms the trends identified by ISME for the period since 1987 but, on the basis of a more detailed analysis over a longer period, points out that a reverse of these trends emerges if comparison is made over the period 1982 to 1988 and goes on to conclude that “in the long run, wage determination mechanisms produce broadly comparable pay movements across public and private sector employment”. While the relevance and usefulness of the report referred to in the question has to be qualified by reference to the foregoing, the overall situation gives us no grounds for complacency.

The Government is acutely aware of the cost of public service pay as a component of public expenditure. It has committed itself to restraint in overall expenditure as part of a broad economic strategy set out in the recent Programme for Government. Its current pay policy is contained in the pay agreement which forms part of theProgramme for Competitiveness and Work. It is the Government's intention to honour its commitments under that programme and in doing so to adhere to the cost parameters which have been agreed for the next two and a half years. It expects, in return, a high level of commitment by public servants to improving the quality, efficiency and effectiveness of public services.

It is also committed to modernise the system for determining public service pay in a manner which will make it more transparent and sensitive to the needs of staff, the Government and taxpayers alike. Already an amended scheme of Conciliation and Arbitration has been agreed in the Civil Service and we expect that discussions in the other areas will be brought to a conclusion in the coming months.