Economics: Almost a year ago, two Maynooth colleagues and I published the results of six months' rigorous and painstaking research into public-private sector pay differentials in Ireland.*
Why did our research take so long? Is it not the case that the Central Statistics Office (CSO) publishes a regular series on average earnings in the public and private sectors and is it not a straightforward matter to draw comparisons between the two?
The answer to this question is yes, of course it is, but such comparisons are of limited value because they do not relate like to like. The CSO averages do not adjust for the fact that public sector workers are typically older, more experienced and more educated, for example, than their private sector counterparts.
What my colleagues and I wanted to do was to discover whether similar people in similar employment circumstances were better or worse off working in the public than in the private sector. In order to do this, we had to control for attributes like age, experience, gender and education, and also for job characteristics like occupation, type of contract and size of establishment.
The CSO data does not permit this kind of analysis. The dataset we had to use is one based on a large-scale survey conducted by the Economic and Social Research Institute (ESRI) and used for much of its research into poverty and inequality.
What were our main findings? Well, our core finding was that on average, public servants earned 13 per cent more than their private sector counterparts on a like-for-like basis in 2001. We also discovered that the size of this margin (the public sector premium) in 2001 was not significantly different from what it had been in 1994, suggesting that pay increases in the public sector had kept pace with the private sector throughout the Celtic Tiger period.
Another discovery was that the margin by which public service workers outearned their private sector counterparts tended to be significantly larger at the bottom of the income distribution than at the top.
A particularly striking finding was that our estimate of the public sector premium for Ireland was more than twice as large as the available estimates for other countries.
The exercise we carried out shares some limitations with other exercises of this type, and we were upfront about this in reporting our results. For example, the data we used does not include the value of benefits-in-kind, bonus payments or pension entitlements. Nor could we make any allowance for the value of the greater security that typically attaches to public sector jobs.
Moreover, the self-employed were not included in our analysis. But, as I say, all these limitations are characteristic of this sort of research and it is very difficult to overcome them.
As things stand, our research is the only piece of rigorous analysis that has been published on public-private pay differentials in Ireland. The paper we published contains not only our detailed results, but also details of our methodology and the dataset we used.
It is open to anybody to use the same dataset and methodology to check the integrity of our results. It is also open to anybody to criticise or challenge what we have done on the basis that we used the wrong data or methodology. To date, there has been no published criticism of our work and no challenge to our results.
Despite all this, a number of beliefs that fly in the face of our research findings continue to enjoy currency, especially among public sector trade union leaders. One is that public service workers fell behind their private sector counterparts during the Celtic Tiger period. Another is that the pay increases recommended by the Public Sector Benchmarking Body (which averaged 9 per cent across the grades examined and cost €1.2 billion a year) derived from this "fact". A related belief is that the benchmarking body's own research uncovered evidence to this effect.
Like many belief systems that are animated by religious fervour rather than rational enquiry, this one is supported more by blind faith than by any evidential basis. For one thing, the benchmarking body, for all the fascinating information it provided about its research methodology, has never published its research results.
Moreover, at no stage in its 278-page report did the benchmarking body explicitly state or opine that public sector pay had fallen behind that in the private sector. Considering the background against which the body was established, its terms of reference and the evident focus of its research programme on public-private pay comparisons, this was a remarkable omission and invites the inference that the body found no such evidence.
I bring all this up again, not out of any great desire to revisit old battle grounds, but because a fresh round of benchmarking will begin soon. I understand that the terms of reference of the new body are currently being drawn up.
I have just one plea to make to those who are charged with protecting taxpayers' interest in this process. It is to insist on the maximum degree of transparency in Benchmarking 2, in particular to insist on the publication of the new body's research results.
Currently, there are some extraordinarily specious arguments being made against lifting the veil on the research results. One is that to publish would breach the confidentiality undertaking given to private sector employers when gathering data on their employees. Of course, such undertakings should be given and honoured, but their purpose is to prevent the publication of data that would identify individual firms and people, not to suppress the publication of all data.
If the latter interpretation of confidentiality undertakings were adopted by the CSO, for example, we would never see another statistic on consumer prices, industrial production, external trade or a host of other economic variables. If adopted by the ESRI, it would have to desist from publishing survey-based research on poverty and inequality.
It would also mean that the type of research carried out by my colleagues and I into public-private earnings differentials could not be published. Now there's a thought. Eureka!
*Public-Private Wage Differentials in Ireland, G.Boyle, R.McElligott and J.O'Leary, ESRI Quarterly Economic Commentary, Summer 2004
Jim O'Leary is currently lecturing in economics at NUI-Maynooth. He can be contacted at jim.oleary@nuim.ie
