Pay and Employment Trends in the Public andPrivate Sectors

Recent posts on irisheconomy.ie (by Aedin Doris, Brendan Walsh, Karl Whelan andothers) have raised questions about private sector pay trends in recent months. Thismatters for competitiveness and for the debate about public/private pay differentials.A related issue is the distribution of employment losses across the sectors.

Pay Trends

On pay, the fast answer is that we don’t know for sure what has been happeningrecently. The popular view is that a

de facto

pay round has been under way across theprivate sector since the middle of last year, and is continuing. Pay cuts in the range 5to 10% for individual firms have been reported frequently, and there appear to besectors where these have become common, such as legal offices, parts of the financialsector, retailing, transport, the PR/advertising companies and print/broadcast mediaamongst others. Bigger cuts have occurred earlier in construction-related firms butseem to be extending beyond that sector more recently. It is clear though that manyprivate firms have not cut, and some have paid increases.Hard information in the form of official statistics is partial in coverage and not up todate. The CSO is in the process of replacing various sectoral employment andearnings surveys with a comprehensive new series called EHECS (Earnings, Hoursand Employment Costs Survey) which will eventually cover the whole economy. Itshould be a big improvement, but right now the CSO is in mid-course correction(Sod’s Law). Softer information is also available in the form of

ad hoc

surveysconducted by various industry and business groups. In this note I thought it would beuseful to gather together the most recent information from both sources.CSO DataThe new CSO series, available only since Q1 07, is the quarterly release entitledEarnings and Labour Costs which thus far covers just industry and financialintermediation. There are three ‘legacy’ series still current which will be absorbedalong the way into the new survey. Several other old CSO series have already beendiscontinued. The legacy series still being published are for (i) construction (ii)distribution and business services and (iii) the public sector. The most recent availablenumbers from all four, covering five sectors, are shown in the table.

Table 1: Sectoral Weekly Earnings from CSO Data, not seasonally adjusted.

% Chg qoq

Latest as

Sector

Totemp

Q108 Q208 Q308 Q408

Peak

% Peak % Chg yoy

Distribution,Business Serv 378000 +0.1 -1.0 -0.7 na Mar 08 98.3 +1.1Construction 218000 -1.5 -1.8 +0.9 +0.2 Dec 07 97.6 -2.4Industry 240000 -0.4 -1.3 +0.3 na Q4 07 98.6 +4.1FinancialIntermediation 81000 +14.4 -0.8 -16.2 na Q1 08 83.0* +3.0Public Sector(excl. Health) 262000 +0.7 +0.4 -0.1 +2.3 Dec 08 100.0 +3.3

*There seem to be pronounced seasonals, with sharp peaks in Q1 and Q2 – there are only 7 obs, sono way to de-seasonalize.

Only construction and public sector have data up to end 2008. Public sector weeklyearnings were up 3.3% yoy, but construction down 2.4%. Distribution/BusinessServices and Industry both weakened noticeably through the middle of last year, asdid Financial Intermediation, but note the severe apparent seasonal, presumablydriven by bonuses. All sectors other than public sector are off their peak, but withdata only to Q3 2008 for three of the five sectors, the only tentative conclusion is thatpublic sector has done best recently. But much of the reported pay-cut action seems tobe recent, in Q4 2008 and Q1 2009, and the CSO data will not shed light on this issuefor some time.Survey DataInformation from the business surveys is fragmentary. IBEC’s Q1 Business SentimentSurvey, taken in February from a sample of 761 firms, includes the figuresreproduced below. Pay reductions were expected by 20% of respondent firms andunder consideration by a further 25%, total 45%. Pay increases were expected by 6%and under consideration by 9%, total 15%. On IBEC’s data, the ratio of (prospective)‘reducers’ to ‘increasers’ is about 3 to 1. Smaller firms were somewhat more likely tobe reducers, with Hotels/Restaurants and Retail the sectors most prone to cut pay.The IBEC survey also suggests that the pattern of lay-offs and short-time working islikely to continue, with high percentages either expecting or considering action inthese areas.

3 ISME, whose membership is concentrated in smaller enterprises, released results of asurvey of 400 firms on March 30

. The survey, which asked about behaviour over the

previous six months,

was conducted the previous week, and is thus more recent thanIBEC. The main results are as shown.

ISME SURVEY

SECTORALConstruction Retail ServiceManufacturingDistribution TotalPay Freeze - Firms 27% 69%50%69% 41%50%Pay Reduction - Firms 71% 31%38%24% 49%41% Pay Reduction amount 15% 11%14%12% 12%13% BUSINESS SIZE *

Micro Small Medium Total

Pay Freeze 50%48% 60%50%Pay Reduction 33%49% 40%41% Pay Reduction amount 16%12% 9%13%

micro = <10, small = 11 to 50, medium = 50

Pay reductions were more widespread than in the IBEC sample, particularly inconstruction. For those firms (41%) cutting pay, the average reduction was 13%,suggesting that the across-the-board figure may have been 5 to 6%, allowing for thepay freezers.