Blog: There’s a good reason for the private-public sector pay gap

This item first appeared in’s Opinion section on Saturday 30th August.

Anyone who reads The Journal now knows that, on average, public servants earn 48% more than private sector workers. This pay gap was revealed earlier this week in the CSO’s most recent earnings survey, which also showed a 93% pay gap between workers in the IT and retail sectors and a 210% pay gap between finance sector staff and those who work in food and accommodation.

These two private sector pay gaps attracted no media comment at all. Rightly so, because everyone knows that pay rates differ depending on the job you do, the skills you have, the responsibility you hold, your experience, your professional and other qualifications and a range of other things. And average pay rates in, say, the IT and food sectors tell us nothing about these things.

But headlines and editorials seldom apply the same common sense to the difference between earnings in the public and private sectors. The amount taxpayers spend on public service pay is an important issue that must remain a matter of public scrutiny and discussion. But there needs to be a bit more objectivity, and genuine analysis, in the debate.

The CSO figures we read about this week are not weighted in any way to take account of the actual jobs that people do or their qualifications, educational attainment, age or any of the other factors that determine how much each of us gets paid. On average (that word again!) public servants are more likely to be professionally or technically qualified – and to be graduates – than private sector workers. This alone explains much of the pay gap.

That’s not to say that public servants are somehow superior to private sector workers – any more than an IT expert is superior to a shop worker. It’s just that they have different skills, responsibilities and qualifications that are rewarded differently in the jobs market.

Imagine a hospital located next to a department store. Both employ, say, 200 people. It’s likely that 80% or more of the hospital staff are graduate professionals with high levels of personal and professional responsibility at work – doctors, nurses, physiotherapists, radiographers, pharmacists, speech therapists and so on. These are highly qualified staff in relatively well-paid professions.

The staff in the department store do important work too, and carry it out to a high standard. But only a small proportion of them are likely to be professionally qualified or even graduates. There will probably be a very wide gap between the average earnings in the hospital and the department store, but there are good explanations for it. The same would be true of a secondary school located near a hotel, or a forensic science lab across the road from a meat factory.

The reality is that economists, statisticians and other researchers disagree about both the size and the significance of the public-private pay gap. The most balanced and comprehensive study of recent years – also conducted by the CSO, in 2012 – acknowledged this. It showed that, taking account of qualifications and other relevant issues, the gap could be as little as minus 1.4% or as much as plus 11.4% if the public service pension levy is factored in.

Significantly, it also found a much wider public-private pay gap for women, which raises real concerns about the prevalence of low paid and often precarious work in large, female-dominated private sector enclaves like retail and hospitality. Indeed, the respected journal Industrial Relations News yesterday [Thursday] made the point that these sectors, which have no equivalent in the public service, drag down average private sector earnings.

This week, my union IMPACT published Making sense of Ireland’s public-private pay gap, which argues that media headlines always exaggerate the size of the gap, and that commentators seldom attempt to explain the reasons why it exists. In the recent past, this has fuelled calls for public service pay cuts. These days, it’s being used to argue against pay restoration – not just in the public service, but across the economy.

On that point, it’s perhaps no coincidence that another aspect of this week’s CSO figures, which was highlighted by the agency itself, went virtually unreported. In the year to mid-2014 earnings fell in both the public and private sectors, despite rising growth and employment.

After six years of stagnant or falling earnings, this stark finding underlines the need for pay restoration in all sectors of the economy – private and public – both to improve dented living standards and to support our fragile recovery by getting people spending in the local economy again. Sadly, there wasn’t much discussion of that this week.

Bernard Harbor – Head of communications