PUBLIC-PRIVATE EARNINGS DIFFERENTIALS IN IRELAND: 1994-2001

July 01, 2004

News

01/07/2004

 

PUBLIC-PRIVATE EARNINGS DIFFERENTIALS IN IRELAND: 1994-2001

Gerry Boyle, Rory McElligott and Jim O’Leary (NUI-Maynooth)



Article appearing in the ESRI Quarterly Economic Commentary, Summer 2004



Our paper uses well-established statistical techniques to analyse earnings differentials between the public and private sectors in Ireland over the period 1994 to 2001. The analysis is based on data collected by the ESRI under the auspices of the European Community Household Panel (ECHP).



Our main findings are as follows:

 

 

  • Irish public sector employees are on average much better-paid than their private sector counterparts. In 2001 the margin was 46 per cent when measured in terms of gross monthly earnings.
  • This reflects the fact that public sector workers are typically better endowed with the kind of attributes that attract higher pay: they tend to be older, more experienced and better educated. They also tend to work in more highly-skilled jobs and in bigger establishments.
  • However, even when such differences are accounted for, employees earn more in the public sector than the private sector. We estimate that, in 2001, this margin – a measure of what is called the public sector premium – was 13%.
  • We have examined the behaviour of the public sector premium over time and have found that it didn’t change significantly between 1994 and 2001. In other words, the earnings advantage enjoyed by public sector workers was preserved intact throughout the very buoyant labour market conditions of the Celtic Tiger period. This is at odds with the widespread perception that public servants ‘fell behind’ over this period.
  • Our estimate of the public sector premium for Ireland is substantially larger than estimates derived by other researchers (and based on similar methodology) for other countries. For example, recent research indicates that public sector premiums in the late 1990s were in the range 4-6% in France, Italy and the UK.
  • A key question that our analysis leaves unanswered is why the public sector premium remains so high in Ireland. An obvious area to explore for answers is the wage bargaining framework. Here an obvious hypothesis is that the social partnership model has conferred on Irish public sector trade unions greater bargaining power than they would otherwise have had and than their international counterparts have typically enjoyed.