Cliff Taylor: A public pay deal will be done - and here’s what it will look like

The problem for the Government in dealing with the public sector pay issue is that it is about a lot more than pay. Time and again the nurses and teachers, interviewed by the media on the picket lines, spoke about not being able to afford a house, or not finding an affordable place to rent, or about the costs of a long commute to work in a Dublin school or hospital.Ireland’s housing omnicrisis lurks behind this dispute, squeezing the younger and lower-paid public sector employees who have been front and centre in the media this week and making it hard – or impossible – to live close to where they work. Their older, better-paid colleagues hover in the background, hoping to benefit from the public sympathy for those who are living from month to month and the resulting pressure on the Government to pay up.A first step towards a deal has been taken with talks to get underway and next week’s strike action called off, though the work to rule continues, A bumpy road still lies ahead. There will be a lot of noise, but a deal will be struck. The €1.2 billion set aside in the budget would “buy” a 3.2 per cent average pay rise, but everyone knows it will be higher. An average increase of close to 4 per cent – halfway between the Government’s initial offer and the likely union opening demand –is the likely outcome.Both sides have to be seen to go to the wire in the talks now getting underway and breakdowns along the way are possible. The Government has to give the impression of safeguarding the public purse. The union leaders have to fight for every last euro. The Workplace Relations Commission will lay on the tea and sandwiches for a few late nights. A separate third party mediator, Kevin Foley is to try to chart a way forward. He has his work cut out, for two reasons.READ MOREOne is that inflation is on the rise again and forecasts of an average rate of a bit over 3 per cent next year are looking shaky. It could be 4 per cent and, in a worst-case scenario, according to the Central Bank, reach 5 per cent. The unions won’t want to lock in a below-inflation rise. And they have noted the result of the militancy from farmers and truckers earlier this year. The Government won’t want to pay up for a worst-case scenario which may not happen.The second reason this is difficult is the wider context; the background of the housing crisis and the resulting squeeze on lower and middle paid public sector employees. Not only are they, in one way or another, paying the price of the housing crisis directly, but indirectly it means that jobs are harder to fill, increasing pressure on existing staff, notably in parts of the health service. This creates a problem for Government and unions in trying to negotiate a way forward. Getting anything like universal support from public servants for a pay offer is not going to be easy – the more comfortable classes might happily take, say, something close to 4 per cent, but what about those lower down the pile? After tax, it will only help a bit with sky-high rents, or saving for a house deposit.Public servants are, in the round, not badly paid compared to the private sector. CSO figures – now a few years out of date – showed that at the lower end, public servants are paid a bit more and at the higher end a bit less. Generous public sector pensions and annual increments are hard to measure, but give a significant boost compared to the private sector.[ Unsustainable pay increases for public sector workers will put Ireland’s stability at riskOpens in new window ]Over recent years, public sector earnings have broadly kept pace with consumer price inflation. You can argue the exact figures back and forward depending on when you start, what is included and excluded and so on. Since 2019, Central Statistics Office figures show consumer prices have risen by around 26 per cent and average public pay by around 28.5 per cent. The surge in prices in 2022 hit people across the economy, as price increases averaged close to 8 per cent. And there are worries now about the impact of another rise in the inflation rate in an economy where costs are already among the highest in the EU.[ ‘My pay hasn’t gone up – and everything else has’: Public sector workers have their sayOpens in new window ]The wide net covered by the public sector reflects the diverse experience of the wider economy. This was well summed-up in research from the Irish League of Credit Unions this week, that broke Irish consumers down into three groups – the comfortable, the coping and the clinging on. The survey shows a disconnect in general between rising household wealth and income over a long period and current economic dissatisfaction – “wealthier but more worried,” as its authors put it. Much of this, they speculated, can be put down to current pressures and uncertainties and to the diverse experience at different income levels. And to the housing crisis.In this context, there is a strong case for any public pay deal to significantly favour those clinging on – and the more stretched members of the coping classes. Previous deals have had a minimum cash increase, guaranteeing a bit more for the lower earners in percentage terms. This one should go further in favouring the lower paid. The cost-of-living “crisis” applies to some public servants, but not to all of them. A pay deal cannot solve the housing crisis and nor can it guarantee the free passage of fuel through the Strait of Hormuz. It will, nonetheless, probably still get over the line. A resumed strike, and its impact on pay, would cause real problems for many public servants in affording the mortgage or the rent.[ Jack Chambers ‘hopeful’ of ‘way forward’ to prevent further public sector strikeOpens in new window ]The Government, meanwhile, will face the traditional dilemma of balancing its role as employer with its wider responsibilities of economic management. A big question, in terms of the public purse, is the expansion in public sector numbers, that has been central to a 55 per cent rise in the public pay bill since 2020 to €34 billion, with numbers rising 42,000 to 420,000. Much of this reflects the need to serve a higher population, but controlling this and getting value for money is a big challenge. Employment in the public sector collapsed after the financial crisis but has since surged, particularly in health, education and non-commercial State agencies. The establishment in the budget of a special taskforce to look at value for money on spending on public pay and services is welcome, though it does beg the question of what all the civil servants in the Department of Public Expenditure and Reform do for their day job.