Report on Pay Talks-Beware of Choreography!

Many thanks to Paddy Healy for allowing us to post this up.

I have appended below the IMPACT Report on Pay Talks to Branch Secretaries and the IMPACT Briefing on European Commission ‘draft leaked report’ on bailout progress. (Are other unions doing this?). The Briefing contains very useful and important factual material.

The threats to public service pay and pensions of existing staff are indeed very serious and must be strongly resisted.

However it is well to understand that there is considerable choreography in play between government and union leaders.

In my opinion it is wise to assume that the substance of the deal is already done with the officer board of the Public Services Committee of ICTU on which IMPACT, PSEU, SIPTU and INTO are represented.

The employers initial position is being made as threatening as possible including a threat to proceed with cuts unilaterally. This will facilitate union leaders in “selling” a very substantial retreat to members on the grounds that they are saving us from much worse. It is “the oldest trick in the book”.

Perhaps a hint of what is afoot is contained in the IMPACT report on the talks: “The unions said that the negotiation would have to make a clear distinction between temporary measures needed to address the current budgetary crisis and change that would remain in place beyond the crisis.”

Let us recall that the existing Public Service Agreement (aka Croke Park Deal) contains a provision that the previous public service pay cut would be restored gradually by using a proportion of savings under the agreement for this purpose. This has now been forgotten by union leaders to the extent that it does not feature in the list of demands (very weak!) put forward by the public service unions at the talks (see below).

Indeed after the successful one day public service strike in late 2009, PSC(ICTU) announced that the unions were entering talks to negotiate temporary changes.
Let us not be fooled twice by “temporary” measures.

Paddy Healy

IMPACT REPORT ON PAY TALKS

Negotiations on a possible extension to the Croke Park agreement
Summary of meeting between unions and management on 14th January 2013

Management position
Management said it would be implementing measures to further reduce the public service pay and pensions bill by €1billion, on top of the measures currently being implemented under the Croke Park agreement, and that it would seek to do this by agreement.
Management opened the meeting by outlining the issues it intended to table during the negotiations, which were grouped under three headings or ‘modules’: Productivity and efficiency measures; workforce reform; and further pay and pension bill measures. Management said it required different application of these measures in different sectors.

Productivity and efficiency measures
· Working hours, day and week
· Overtime/premia/twilight/supervision and substitution, etc
· Flexibility to deploy atypical working arrangements
· Management flexibility in the use and deployment of hours, rosters etc
· Extended opening hours of public offices

Workplace reform
· (a) Redeployment:
o Simplified arrangements for more flexible and faster redeployment
o Extended distance
o Better identification of surplus staff
o Exit mechanisms

· (b) Standardisation and modernisation of terms and conditions:
o Flexitime
o Work sharing patterns
o Performance based contracts for management grades
o Progression across grades on merit only and competitive promotion

· (c) Workforce restructuring and performance:
o Grade rationalisation and consolidation in each sector
o Streamlining management structures and increasing spans of control
o Increased staff flexibility in the assignment of work, including duties previously done at more senior levels
o Measures to strengthen performance management processes, including robust measures to manage underperformance

Further pay/pensions bill measures
· Pay and pensions measures, including rates of non-core pay
· Increments
· Pay reductions “at certain levels”
· Allowances review

Union response
Union representatives opened by saying that the Croke Park agreement was still ‘live’ and did not expire until March 2014. The negotiation was aimed at seeking an extension to this agreement and its core protections must remain in place.
The unions said it was responding to management ‘without prejudice’ and that none of the measures or ‘modules’ outlined by management had been accepted. In general terms, the unions said any outcome of the talks would have to meet three criteria:
· Management would have to demonstrate that any proposal would make genuine and necessary savings.
· Any measures would have to be fair, which meant the outcome could not fall disproportionately on any group of staff, particularly those on low and middle incomes
· The outcome would have to pass the tests of ballots of union members.
The unions said that the negotiation would have to make a clear distinction between temporary measures needed to address the current budgetary crisis and change that would remain in place beyond the crisis. They then outlined measures that they required to be satisfactorily addressed in the negotiations. These included:
· An adjustment to pension levy by exempting more earnings
· Measures to ensure the elimination of the two-tier workforce
· The consolidation of relevant allowances
· Outsourcing policy and practice (including ‘section 38/39’ agency issues)
· Agency workers – costs and approach
· Redeployment policy and practice and the ‘hoarding’ of staff
· Casualisation, particularly in second level teaching
· The moratorium on filling promotion posts
· Jobs initiatives from Department of Social Protection
· Waste and duplication elimination measures
· Reduction in consultancy expenditure
· Incentivised career break and hours reductions
· The treatment of State agencies
· Outstanding third party recommendations.

The unions said they would also raise some other industrial relations issues in the course of the negotiations.
The negotiation adjourned until 2pm on Tuesday 15th January 2013.

ENDS

IMPACT Briefing on European Commission ‘draft leaked report’ on bailout progress
12th January 2013

Irish Independent report
Today’s Irish Independent reports that a ‘draft leaked report’ from the European Commission calls for pay cuts for hospital consultants and other (unidentified) staff, calls on the Government to “scrap plans for further redundancies” in the public service, and highlights a “significant and unexplained” public-private wage gap.
It also says “Substantial additional savings through efficiency gains cannot be made within the required timeframe without damaging patient care unless high salaries and the high price of other inputs are seriously addressed.”

Status of the report
This is a “draft leaked report.” So it is not necessarily the final view of the Commission, let alone the troika. It may or may not turn out to be accurate reflection of Commission views, but it would not be the first time that Irish media had wrongly reported that troika members were critical of Croke Park.
Troika representatives have repeatedly acknowledged the contribution of Croke Park to Ireland’s recovery and reputation and in their press conferences have declined frequent invitations (from journalists) to criticise the deal.

International pay comparisons
According to the IMF, Irish public service pay was 11.2% of GDP in 2011 (the last year for which figures were available). This compares to an OECD average of 11.1% for OECD countries who are members of the EU (or 10.8% of OECD overall). In other words, Irish public service pay is roughly in line with comparable EU countries as a percentage of GDP even before you deduct the so-called ‘pension levy’ (an average 7% deduction), which is not included in the figures.
If comparisons are made on the basis of GNP, Irish public service pay looks higher. But all our ‘troika’ and EU targets are based on GDP and there are other arguments against using GNP as the comparator.
The most recent and comprehensive data on international public sector labour costs comes from the OECD. Its 2011 report found only two groups – hospital consultants and top central government managers – are paid above international standards.
In general, the OECD report says that the cost of employing Irish public servants is about average when adjusted for price differences by measuring ‘relative purchasing power’. Relative purchasing power is routinely used in international comparisons of pay in the public and private sectors. The OECD says its figures capture the so-called ‘pension levy’ but not the pay cuts (also worth an average of about 7%) imposed in 2010. You can read more about the OECD report HERE.

Many Irish public servants are paid less than their German counterparts
Medical consultants are the only group mentioned in today’s Irish Independent report. It is possible that others are earmarked in the Commission’s ‘draft leaked report’, but it is hard to imagine the Independent choosing not to mention them if they were.
The figures above show that on average Irish public sector pay is in line with pay in comparable European countries. But research conducted for IMPACT shows that certain large groups of Irish public servants – including clerical officers and primary teachers – are paid less than their German counterparts at every stage of their careers, even though the cost of living is 17% higher here.

Addressing ‘high pay’ in the public service
Consultants’ pay is the focus of today’s Irish Independent report, which extrapolates to suggest that all health/public service pay is out of step with European norms – a common technique among critics of the agreement.
Unions say there is an issue about high pay – but this is an issue about high pay, not high pay in the public service. Recent Dáil answers show that 111,000 people earn over €100,000 a year in Ireland. But just 5,808 (about 6%) of these are public servants (about half are hospital consultants).

Unions say the issue of high pay is best tackled through tax not pay cuts as (1) this would address the real issue and (2) a focus on the public service alone (6% of the ‘problem’) would make relatively little impact on the budgetary figures.
· Less than 2% of public servants earn over €100,000 a year.
· 45% of public servants earn less than €40,000 a year.
· 68% of public servants earn less than €50,000 a year.
· 82% of public servants earn less than €60,000 a year.
· 90% of public servants earn less than €70,000 a year.

Public service pay has been cut

Since 2009, Irish public servants have endured pay cuts averaging 14% – with an additional 10% cut for ‘new entrants’ and promoted staff, who are now paid nearly a quarter less than in 2009. Many have also seen significant additional income cuts as overtime and premium payments have been abolished or amended under the Croke Park agreement. Public servants are PAYE workers who have also endured all the additional taxes and charges imposed over four years of troika-driven austerity budgets.

The so-call ‘public-private pay gap’

The Independent report says that the Commission report “highlights the significant and unexplained wage gap between private and public sector workers.” This is an extraordinary statement given that there has been so much research on public-private pay comparisons in recent years.

Last October (2012) the Central Statistics Office produced the most comprehensive report on the issue. It acknowledged that economists here and abroad disagree about how to compare pay in the two sectors, but said the ‘gap’ was decreasing regardless of the methodology used.
Its report found that the pre-pension levy pay gap for men ranges between 2% and 14%. The pay gap is wider for women at between 9% and 20%. So, when the pension levy is applied the public service pay ‘premium’ ranges from minus-5% to plus-7% for men, and from 2% to 13% for women. (The larger gap in pay for women raises particular concerns about the prevalence of low paid and often precarious work for women in the private sector.)
These are aggregate figures, which do not attempt to compare the pay of specific jobs with similar skills and education requirements, experience, or levels of responsibility. Far from being “inexplicable” most economists would agree that these are the factors that account for the so-called ‘public-private pay gap’.

The value of the Croke Park agreement
The Croke Park agreement has so far delivered recurring annual savings of €1.5 billion and is on target to deliver net savings of €3.3 billion by 2015. Next week unions and management will enter negotiations aimed at increasing this by a further €1 billion. Unlike other countries in similar budgetary positions, this has been achieved without any industrial action or even the threat of industrial action. The deal has also delivered:
· A staffing reduction of 30,000 (with another 10,000 to come) which is happening to meet targets agreed with the ‘troika’, including the European Commission.
· Pay cuts and pension levies averaging 14% (24% for new entrants and promoted staff) on top of increased taxes and charges imposed over four years of troika-driven austerity budgets
· Further income reductions for many as rosters, overtime and premium pay arrangements have changed
· The redeployment of thousands of staff within and between public service organisations
· Reductions in sick leave
· Longer working hours for some
· Fewer leave days for many
· Changes to allowances.