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Benchmarking, Social Partnership and Higher Remuneration: Wage Settling Institutions and the Public-Private Sector Wage Gap in Ireland

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Author Info

  • Kelly, Eilish

    (Economic and Social Research Institute, Dublin)

  • McGuinness, Seamus

    (Economic and Social Research Institute, Dublin)

  • O'Connell, Philip

    (Economic and Social Research Institute, Dublin)

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.

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File URL: http://www.esr.ie/Vol40_3/05Kelly.pdf
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Bibliographic Info

Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 40 (2009)
Issue (Month): 3 ()
Pages: 339–370

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Handle: RePEc:eso:journl:v:40:y:2009:i:3:p:339-370

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  1. Lucifora C. & Meurs D., 2004. "The Public Sector Pay Gap in France, Great Britain and Italy," Working Papers ERMES 0403, ERMES, University Paris 2.
  2. Gerry Boyle & Rory McElligott & Jim O'Leary, 2004. "Public-Private Wage Differentials in Ireland, 1994-2001," Economics, Finance and Accounting Department Working Paper Series n1421004, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  3. Gregory, Robert G. & Borland, Jeff, 1999. "Recent developments in public sector labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 53, pages 3573-3630 Elsevier.
  4. Javier Gardeazabal & Aratza Ugidos, . "More on identification in detailed wage decompositions," Studies on the Spanish Economy 140, FEDEA.
  5. McGuinness, Seamus & Kelly, Elish & O'Connell, Philip J., 2008. "The Impact of Wage Bargaining Regime on Firm-Level Competitiveness and Wage Inequality: The Case of Ireland," Papers WP266, Economic and Social Research Institute (ESRI).
  6. Frances Ruane & Xiaoheng Zhang, 2007. "Location Choices of the Pharmaceutical Industry in Europe after 1992," The Institute for International Integration Studies Discussion Paper Series iiisdp220, IIIS.
  7. Blaise Melly, 2005. "Public-private sector wage differentials in Germany: Evidence from quantile regression," Empirical Economics, Springer, vol. 30(2), pages 505-520, 09.
  8. Richard Disney & Amanda Gosling, 1998. "Does it pay to work in the public sector?," Fiscal Studies, Institute for Fiscal Studies, vol. 19(4), pages 347-374, November.
  9. Mueller, Richard E., 1998. "Public-private sector wage differentials in Canada: evidence from quantile regressions," Economics Letters, Elsevier, vol. 60(2), pages 229-235, August.
  10. Adamchik, Vera A. & Bedi, Arjun S., 2000. "Wage differentials between the public and the private sectors: evidence from an economy in transition," Labour Economics, Elsevier, vol. 7(2), pages 203-224, March.
  11. Boyle, Gerry & McElligott, Rory & O'Leary, Jim, 2004. "Public-Private Wage Differentials in Ireland, 1994-2001," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), vol. 2004(2-Summer), pages 1-23.
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Cited by:
  1. Karl Whelan, 2010. "Policy Lessons from Ireland’s Latest Depression," The Economic and Social Review, Economic and Social Studies, vol. 41(2), pages 225-254.
  2. Sebastian Dellepiane Avellaneda & Niamh Hardiman, 2010. "The European Context of Ireland’s Economic Crisis," The Economic and Social Review, Economic and Social Studies, vol. 41(4), pages 473–500.
  3. Callan, Tim & Nolan, Brian & Walsh, John R., 2010. "The Economic Crisis, Public Sector Pay, and the Income Distribution," Papers WP344, Economic and Social Research Institute (ESRI).
  4. Hardiman, Niamh, 2009. "The impact of the crisis on the Irish political system," Open Access publications from University College Dublin urn:hdl:10197/1691, University College Dublin.
  5. Brian Nolan & Bertrand Maitre & Sarah Voitchovsky & Christopher Whelan, 2012. "GINI DP 70: Inequality and Poverty in Boom and Bust: Ireland as a Case Study," GINI Discussion Papers 70, AIAS, Amsterdam Institute for Advanced Labour Studies.
  6. Bergin, Adele & Kelly, Elish & McGuinness, Seamus, 2012. "Explaining Changes in Earnings and Labour Costs During the Recession," Papers EC9, Economic and Social Research Institute (ESRI).
  7. Kelly, Elish & McGuinness, Seamus & O'Connell, Philip J., 2013. "Comparing Public and Private Sector Pay in Ireland: Size Matters," Papers RN2012/4/2, Economic and Social Research Institute (ESRI).
  8. Kelly, Elish & McGuinness, Seamus & O'Connell, Philip J., 2009. "The Public-Private Sector Pay Gap in Ireland: What Lies Beneath?," Papers WP321, Economic and Social Research Institute (ESRI).
  9. Sebastian Dellepiane & Niamh Hardiman, 2011. "Governing the Irish Economy: A Triple Crisis," Working Papers 201103, Geary Institute, University College Dublin.
  10. McGinnity F & Russell H, 2011. "Workplace Equality in the Recession? The Incidence and Impact of Equality Policies and Flexible Working," Research Series, Economic and Social Research Institute (ESRI), number 200, January.
  11. Sarah Voitchovsky & Bertrand Maitre & Brian Nolan, 2012. "Wage Inequality in Ireland’s “Celtic Tiger” Boom," The Economic and Social Review, Economic and Social Studies, vol. 43(1), pages 99–133.
  12. Honohan, Patrick & Donovan, Donal & Gorecki, Paul & Mottiar, Rafique, 2010. "The Irish Banking Crisis: Regulatory and Financial Stability Policy," MPRA Paper 24896, University Library of Munich, Germany.
  13. Lane, Philip R., 2009. "A New Fiscal Strategy for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 40(2), pages 233–253.
  14. Bergin, Adele & Conefrey, Thomas & FitzGerald, John & Kearney, Ide, 2009. "Recovery Scenarios for Ireland," Research Series, Economic and Social Research Institute (ESRI), number RS007, January.

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