Benchmarking, social partnership and higher remuneration: wage settling institutions and the public-private sector wage gap in Ireland

Abstract

This paper uses data from the 2003 and 2006 National Employment Surveys to analyse the public-private sector wage gap in Ireland. In particular, we investigate the impact of awards implemented under a number of wage setting institutions on the pay differential. These include the pay increases awarded by the Public Service Benchmarking Body in its first report and the increases given to higher-level posts in the public sector by the Review Body on Higher Remuneration in the Public Sector, Reports No. 40 and 41. The pay increases that were awarded under the Social Partnership process in Sustaining Progress and the Mid-Term Review of Part Two of Sustaining Progress are also captured in the data used. Furthermore, we assess the impact of pensions on the gap. The results indicate that the public sector pay premium increased dramatically from 9.7 to 21.6 per cent between 2003 and 2006. Furthermore, we found that by 2006 senior public service workers earned almost 8 per cent more than their private sector counterparts, while those in lower-level grades earned between 22 and 31 per cent more. The public premium results derived in this paper relating to March 2006 predate the payment of the two most recent Social Partnership wage deals, along with the pay increases awarded in the second Benchmarking exercise and by the Review Body on Higher Remuneration in Reports No. 42 and 43. The results presented raise serious questions with respect to the justification for any further boosts to the pay levels of public sector workers. Finally, the study highlights the importance of correcting for differences in pension coverage between public and private sector workers when making any assessment of the public-private sector pay differential.