October 23rd Morning: The Recession Diaries

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To kick public sector workers around the block is in danger of becoming an officially recognised sport; bloated, inefficient, over-paid – and don’t even mention pensions.  Tony O’Brien is opining on the best instrument – scalpel or chainsaw – to achieve public sector savings:

‘If tackled correctly we could be aiming for efficiencies of 10 per cent, which is equivalent to just over 36,000 positions.’

Over at the Sunday Times, Matt Cooper is demanding that the Government ‘take the axe to the bloated public sector’, and ditch ‘underworked pen-pushers’. The Sunday Independent has been running columns on public sector numbers (they don’t say nice things).  ISME is demanding forced redundancies of up to 30,000. And it’s a brave soul who ventures on to politics.ie in defence of public sector workers.

I’m really, really, really getting tired of this debate.   I’ve gone through these arguments before but the issue keeps raising its head.  Well, let’s get the analytical cudgels out one more time and take on one of the arguments that is being circulated: the ‘bloated’ state of the public sector.

Using the EU Klems database, let’s compare the proportion of public sector workers to that of the population. In 2005 (the last year data is available), 9.9 percent of the Irish population is employed in the public sector.  What is the proportion throughout the EU-15?  12.8 percent. Hmmm. That’s quite a bit higher – in fact, that’s nearly 30 percent higher. If the Irish public sector is ‘bloated’, public sectors throughout Europe must be absolutely gluttonous. We’d have to employ a further 100,000 in the public sector just to be an average European country.

Here’s a little twist – by using the ratio of public sector employment to the population as a whole, I’m actually skewering the numbers in ISME’s, et al, favour. If I used a ratio to total employed, EU-15 numbers would be higher since, in 2005, they had higher unemployment. If I used a ratio to working age population, again the EU-15 numbers would be higher since they have higher elderly population.

Let’s wade through some more numbers (facts are always a pleasant antidote to hearsay arguments).  The Right constantly point to the growth in public sector number over the last few years.  They’re correct – they have been growing.  Here’s two perspectives:

1)  In 1997, only 7.5 percent of the Irish population were employed in the public sector – compared to 11.9 percent in the EU-15.  So what we have been experiencing is a ‘catching-up’. Indeed, this is the same phrase that the OECD used in their recent study of the Irish public sector. They stated that our public sector was small (one of the smallest in the inudstrialised world) and that the above-average growth was merely a catching-up. That we would have to employ more than 100,000 just to reach the EU-15 average shows we still have a hell of a lot of catching up to do.

2)  All things being equal, public sectors grow with the population. There are more children to teach, more people to mend, more neighborhoods to patrol, etc.  In Ireland, this is all the more relevant.  The EU-15 population grew by 4.2 percent between 1997 and 2005.  Ireland’s population growth exceeded that by leaps and bounds – 12.4 percent: nearly three times as fast.  So let’s a another round of numbers out.

The population of the EU-15 increased by 12 million between 1997 and 2005. During that same period the number of public servants increased by 4 million.  That’s a ratio of one extra public servants to every three new residents. Therefore, given Ireland’s big population increase, is the increase of Irish public servants out of keeping with the EU-15 ratio? No – there is only a fractional difference.

I can hear the sceptics already. One objection is that EU-15 public sector numbers are inflated by larger military complexes. Yes, that’s true – but the difference is only fractional. Taking out armed forces employment reduces the percentage of public sector workers to 12.2 percent in the EU-15, while Ireland still only registers 9.7 percent.

However you shake it, the fact is that Ireland has a small public sector workforce (it comes in at 11th out of the EU-15).  And the fact is that it has been getting smaller – at least according to the OECD:

‘ . . . public sector spending and employment growth have not kept up with population and GDP growth. Ireland’s real average annual growth rate in public expenditure between 1995 and 2005 was 5.1%, significantly slower than real GDP growth of 7.5%. Government policy therefore has actually decreased the total number of public sector employees as a percentage of the labour force and decreased the overall public sector wage bill as a percentage of GDP.’

Wow – small and getting smaller.

Will these facts silence the atavistic drum-beating?  Doubtful. Facts rarely get in the way of ossified mind-sets. Because to accept these facts would raise new and even more troubling questions. And one of those questions is this:  how is it that countries and economies that shoulder an even greater public sector burden are not being affected anywhere to the same degree as we are? The Irish economy is crashing and burning at a rate rarely seen in modern times among industrialised nations? Why is that, when we have such a small public sector burden to carry?

We’ll get to that answer soon.

(But here’s a little taster:  maybe some countries and economies don’t see their public sector as a ‘burden’, maybe they see the public sector as a facilitator – facilitating social and economic growth in a more integrated mixed economy.)

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