Ireland

Public sector pay

I was asked to expand on something I tweeted about the other day on Public Sector pay in Ireland. Two things I need to say before I get into the meat of the subject. First, I got my information from posts on the Irish Economy blog. The recent one was on the Public Sector pay gap in a number of European countries, and the other was on what proportion of Government spending goes on wages and pensions. In both cases the articles refer to published reports. The second thing I want to say is this is not an exhaustive or definitive analysis. Be careful how you use the numbers I come up with below.

Anyway, the more recent report from the ECB on public sector pay just compared the premium that being a civil servant gives to your pay packet. The key piece of data though is that the Public sector pay premium in Ireland is about 30%, and it is one of the largest in Europe.

Their Irish data comes from previous studies dating up to 2007. I accept that things have changed since in the public sector, but they have also changed in the private sector as well. My employer has fired about 40% of its Irish workers and put the rest of us on a pay freeze for the last 3-4 years. And I think I got off lightly compared to friends who work in Chemical and Mechanical Engineering and Architecture. My point is, the data is still relevant. It also has to be pointed out that these studies control for all the usual factors like the job type, age, education, gender etc. So they are valid comparisons of private vs public pay. As far as I know what is omitted is pensions. And that is significant. Few people in the private sector are on the gilded defined benefit (DB) pensions public sector workers receive. My local HR team tells me that a DB pension is equivalent to 20% extra on a salary.

I wanted to do a back of the envelope estimate of what that 30% costs us. That took me to the other report, an update from the Government on their spending to the European Commission. I took two numbers from it. The share of spend on wages and pensions is 25.5% and the total spend is €26.7Bn (Compensation of “Employees and Intermediate Consumption” page 49). It’s a very crude estimate, ignoring the cost or premium of pensions, and the fact that the money may not be recoverable, but…

If Public Sector pay is 130% of Private, and the total bill is €26.7Bn, then making the public sector salaries equivalent would mean the cost is €26.7/1.3 = €20.5. And so the the annual premium we pay out is €26.7-€20.5 = €6.2Bn.

Even if we were only talking about half that sum, and we were able to reduce that premium from 30% to 20%, that’s €1Bn extra to spend on things that are a higher priority than a group who, however deserving they may be, really managed to clean up in the Celtic Tiger years.

Provoking

Sometimes I do jobs that mean I need to have protection…
Protection.

Photo by Clent Bryan Saron.

That’s me, second from the left. In case you were wondering.

The role of a TD

I came across this interesting snippet about Edmund Burke a 17th century English parliamentarian.

He (rather bravely) informed his 18th-century constituents that he was not an agent for their narrow interests, but merely their elected representative in a national, deliberative assembly.

If only our TDs thought like that. Instead we have a mob that run the spectrum from Shane Ross who has declared he stands as a national candidate and will focus on such issues (yeh!), to the latest incarnation of the Healy-Rae dynasty who’s interest in national issues begins and ends with Kerry winning the all Ireland. Otherwise it’s all about the bacon he can bring home to his constituents and damn anyone who gets in his way on that.

One of the best suggestions I saw for political reform recently was to put constituency ombudspeople in place to handle the local crap that TDs (who are supposed to be national representatives) waste their time on. If you feel you have a problem with government, or improper application of rules then you would go to the ombudsperson. No more using a TD to get a leg up on a housing list, or fix some pot holes. In fact it should be illegal for them to seek privilege or favour for any constituent in that way.

It’s unlikely to happen of course so I will have to hope that maybe the new government will lose the run of itself and devolve real power to local governments away from the Dail. That would at least shift some local issues to where they should be handled. You would think the pols would be in favour of this as well as it would move work and agro off their shoulders – no more 1am phone calls from people looking to get their drink driven arrest taken care of.

They complain they are overworked with such local issues, wouldn’t they like to have them off loaded to a better forum? And then when they don’t have to spend all their time on parish priorities they could actually focus on the national stuff. That would seem to me to be a better idea than just cutting the number of TDs (and therefore making the smaller number have to handle an even bigger pile of local shite).

A good question to ask for any of the proposed political reforms you see discussed is “If we had done this 10 years ago would it have helped us avoid the mess we are in now?”

Hmmmm,
Cut the number of TDs? – No
Abolish the Seanad? – No
Replace ministerial drivers with civilians instead of Gardai (actually described as “political reform” by RTE) – No

So people, make sure the reform you are being offered is really real!

BTW, it is probably worth pointing out that Edmund Burke backed free trade (which annoyed his Bristol voters, one of the few actually representative constituencies in a time of rotten boroughs), Catholic emancipation, and capital punishment. His reward was to get turfed out at the next election.

To vote or not to vote

Here’s a question; Am I an emigrant? I have been living in Austria for a year, I work and pay taxes here, but at the same time our family home is in Dublin, and we plan to return at some stage.

It is sort of important to know, as you could argue that it has a bearing on whether Laura or I should vote in the upcoming election.

I have three questions around this event.

  • Should I vote?
  • Who would I vote for?
  • Can I vote?

Personally I believe emigrants should have a vote. But I don’t think that it should last forever. A person who has only left the country in the last 12 months should be entitled to vote, and there should be a mechanism to allow them to do so from abroad. But someone who has been gone 5 years should forfeit that right. Your ties fade with time, and those who have effectively moved away for good can’t expect to have the same voice in deciding things like laws or taxes.

The next question is who to vote for? I am unusual in that I primarily vote on national issues, and party positions rather than the strength of the local candidate*. Unfortunately I can’t really get enthused by any of the choices on offer. Fianna Fail is out for their disastrous mismanagement of the economy over the last 10 years. The Greens because of their positions on GM foods and incineration, the Shinners because their are the Shinners. The choice then is Labour or Fine Gael. I do believe (and the expert opinion agrees) the FG position of favouring spending cuts over tax increases is better for the economy in the long run. And Labour continues to surprise me at their level of economic ignorance or willful deception of the electorate, as well as taking the daft view that government can create jobs. But to me political reform to prevent such a mess happening again is as important as a plan for tackling it now. And here Fine Gael’s plan is pretty much “things are grand today, so lets just tweak a bit”. Do you think that if a decade ago we had abolished the Seanad and had 20 less TDs we wouldn’t be in the shit today? It all leaves me underwhelmed, and frankly feeling that if there is no candidate worth voting for, why should I make the trip home?

That leaves me with the last question; Can I vote? Fortunately this one provides me with help on the other two. I checked the register, and I am no longer on it. I guess the government feels I am an emigrant. So I won’t be booking a flight, and I don’t have to feel guilty about it.

* Which is a shame for Ivana Bacik. I would vote for her in a flash if she was independent or FG.

“Those who are indebted are not free”

Today I find myself in Warsaw. It’s an interesting place to be, probably the country in Europe that was least impacted by the recession. I would have to check the numbers again, but I think they mightn’t have had any quarters of negative growth.

I went for lunch with a Swede and the Irish situation came up, and I talked a bit about the infamous bank guarantee (and the information here that the government were advised against it).

He did share a quote with me from Göran Persson, who was the Swedish Finance Minister in their financial crisis in the 1990s.

“Those who are indebted are not free”

Persson’s point was that hobbled by such a huge national debt (generated by a 13% budget deficit) the country had few choices. It had to act to restore health to their finances, they had no choices, they were not free.

And that is where Ireland is going to be after this budget. You can argue that our sovereignty was lost when the EMF was called in, but as soon as we lost control of the finances (probably around 2005, it only really became apparent later when the bubble burst) we lost our freedom. In a few years time when the budget is back under control we will still have the pile of debt to address.

Back in Ireland today is budget day, and in a few months there will be an election. But then the thing everyone needs to focus on is getting the engine of the economy restarted. It is surprisingly healthy beneath all the doom and gloom. Output is up, unemployment has stabilised (helped by the release valve of emigration) and FDI continues to flow into the country.

Growth more than anything else is needed now, not hanging bankers from lampposts*. What I would like to see now is more constructive talk about the way forward, and less wallowing around in the mess of self pity and recrimination. Or I may not bother coming back when my contract is up in Austria.

* This isn’t to say that we should not also go after the guilty parties. I would like the new government to do what the Icelandic one has done. Set up a commission to investigate what happened, identify the policies that lead to disaster, name and shame those responsible, prosecute guilty parties, and implement a constitutional convention to change the system so this is far less likely to happen again in the future.

Politics and the national interest

Home at the weekend I watched with a degree of hope, amusement, and ultimately disappointment the struggle and ultimate collapse of the national squad before the All Blacks. Out in the real world I went through similar emotions but have ended up angry instead.

We can see that the country is in the shit, but it has been thrown a lifeline by our friends in Europe (those who voted “No” to Lisbon take note). In order to complete the negotiations for the bailout package we need to show we have a budget and a 4 year plan, one which will meet the EMF’s stringent conditions. Most of those conditions will not be negotiable, regardless of who sits in the Taoiseach’s office.

A budget has to be passed, time is of the essence. But what is happening in the mean time is a grubby scramble for political advantage by people who seem to have no interest in, or knowledge of, what is happening in the real world. As one international commentator said of the opposition:

blocking the budget might advance their arrival in government by a few weeks. But it would also leave them with a difficult legacy. In office, they would have to propose budget cuts similar in scale to those they had just rejected, in even more challenging economic times, and with less international goodwill

Apart from the odiousness of these people putting their personal political careers (the independents) and general political point scoring (the parties) ahead of the national interest, they aren’t supposed to be stupid, so they should know damn well how critical the current situation is. But no, they don’t seem to care. More worryingly some of the people in the opposition actually seem to be clueless. I heard a woman from Labour being interviewed on the radio yesterday at lunchtime. I am no finance guru, but it was obvious to me she was out of her depth talking about the IMF, EMF and the details of the bailout. It scares me to think that in only a few weeks she could be sitting at the cabinet table with people as poorly informed, making decisions that will map out the future of the country for the next generation. One group of politicians has already trashed the country, now another seems to be ready make the rubble bounce.

This is what you get from a political system that favours publicans, teachers and solicitors, and locks out people with the specialist skills we need. At the moment I see little in any of the parties that I could vote for. I really don’t see myself making the effort to return to vote when the election happens (Dun Laoghaire Rathdown makes it very hard for people to get postal votes). My one hope is that sometime in 2011, as the dust settles there will be a proper debate (i.e. not one run by politicians) on the future of the constitution and how we can overhaul it to fix our dysfunctional political system.

Financial Crisis reality TV shows I would like to see

If our national broadcaster (that’s RTÉ and not ORF, I haven’t gone totally native) is looking for some really good TV ideas related to the current crisis I could sell them these two. Both are sort of reality TV, and should be cheap to produce.

  • The People’s Budget – Select 20 or so random punters for 2 programs. In the first program, brief them on the current Irish financial situation, and economic best practices. Let them make the decision on how best to proceed, via tax increases, spending cuts, or financial stimulus (if someone can give us the money). Let them ask questions of independent economists (i.e. probably not too many Irish ones), and then let them come up with a high level plan. Any plan will involve cutbacks, so for the second program have them briefed on where the government spends its money today. Let these members of the public decide what to prioritise, and what to cut. Let’s see what the public will pick when they have to make the decisions.
  • The Trial of Fianna Fail for Treason: Televise a mock trial over a couple of evenings where the Fianna Fail party is put on trial for treason after causing the loss of Irish sovereignty. Have the prosecution and defense case argues by to senior counsels with full proper legal teams. And let a real jury of 12 members of the public decide the verdict. This one was inspired by a post from Jason O’Mahony on banning Fianna Fail.

I am sure these would make riveting TV, with massive viewerships. Unfortunately RTÉ are not known for their giant political cojones, and as they showed with the “Greatest Irishman“, they have nack for screwing up the ideas they do run with.

Watching the crisis from Vienna.

Being stuck here in Austria I am getting most of my information on what is happening in Ireland right from international sources on the Internet – the Financial Times, the Economist, the BBC, the EU Observer, various finance and economics bloggers, and even the odd time a google translate version of German speaking media like Bild. Either for reasons of space, or ignorance or because they feel it doesn’t matter these sources ignore some of the distinctions Irish people worry about. As we say when presenting stuff to customers, it doesn’t matter whether these are right or wrong, what matters is this is where the “market” gets its information from, and makes its decision based on this.

I have heard it mentioned that part of the reason AIB (formerly Allied Irish Bank for my foreign readers) is in trouble is their name is so similar to “Anglo Irish Bank” an acknowledged scoundrel of this crisis. And I have also seen that almost uniformly the Government is said to be facing into elections in coming weeks, and not by-elections. That’s a big misconception to have if you are worried about the stability of the country.

On the positive side I don’t see the same sort of negativity there was towards Greece. We get criticised for our bubble, but no one is saying our government lied about its spending and our people are corrupt, work shy, skivers who want hard working Germans to pay for their early retirement.

At work in Germany, Austria, Poland and Hungary, I have been getting asked what is going on, and what happened. There has been some slagging. I have a standard simple (deliver in the time it take to take 2 bites of your lunch) explanation which goes like this: Our problem has to do with entering the Euro, specifically how we handled that event (despite what some deranged British commentators may think). Having access to cheap money for the first time ever, we lost the run of ourselves and went on a spending binge. A jump in the property market became a massive bubble. The situation was aggravated by personalities and the policies they pursued, but pretty much all of us were happy to enjoy the fruits of the boom while it lasted. You didn’t have to be a property speculator to do well, you just had to enjoy rising wages, expanded (and now unaffordable) government services, or the new infrastructure. But now the party is over we all have to take the blame. That’s how it works in a democracy. We either voted for the ones responsible, or for the opposition who were so hopelessly ineffective.

One thing I will say is that, much as the country wants an election, it really doesn’t need one right now. Stability is more important than revenge. We will have our chance to crucify the government not too long from now. Even those worried about “loss of sovereignty” have to accept that a temporary unpopular government is far better than an IMF one.

Tax or slash?

The Economist has the interesting results of a survey of voters around the world on how they would prefer their governments to address deficits. By wide margins, in every case, people prefer to see government spending cut rather than their taxes increase.

Raise taxes vs cut spending

Raise taxes vs cut spending. Economist.com

Ireland wasn’t in the survey but I can’t imagine Irish voters would have answered much differently. If I was a public sector union leader I would be worried. Economists are pretty clear that cutting spending is better for the ecomony than raising taxes, and the voters seen to agree.

Mind you in the Irish situation where we are spending €15Bn per year more than the €35Bn we are taking in revenue there is no way that the gap can be closed by raising taxes anyway. There are some political parties, like Sinn Fein, who maintain cuts can be avoided, and instead those who are not currently paying “their fair share” will make up the difference. I have shown you the numbers. Do you think we can increase income tax by 150% all of a sudden? This means the Shinners and the rest of the “blame the bankers”, “we didn’t cause the recession, so why whould we pay for it” lot are either pretty fucking stupid, or are lying to attract votes from a worried and confused electorate. I don’t think the people in Sinn Fein are dumb, but you can make your own decision on their motives.

What worries me is that people are focusing too much on the cuts and how it will impact them, and not paying attention to the fact that they quite probably are grossly inadequate. About €3Bn in cuts are on the table in the upcoming budget. The current account gap is €15Bn. Per YEAR! And that is before you add the bank bail out (which fortunately we can fudge off the books). People really don’t seem to be facing up to, or understanding the scale of the shit storm we have landed ourself in. If they did government ministers would not be explaining that there is no extra money for pet projects.

Irish words for Rain

A while back I asked for words we Irish use to describe rain. I wanted to demonstrate to the Austrians, who seem to have only 1 word for rain, that they are failing to convey the subtlety and nuance of the experience you can expect when you go outside and it is precipitating.

Thanks for all the suggestions. I have ended up with a list of 30 which you can see at the bottom of the post. I have ranked all of them on a chart. The y-axis describes the average size of the “rain” drop coming from the sky. And the x-axis conveys the quantity of drops falling at any given instant. This is a subjective chart, based on my views of rainfall. Some terms I was a little unsure of, and one “The Lad” (thanks Mick) has me baffled. I am open to feedback on any and all. And if you have more, let me know and I might add them to a future version.

Now the graph:
Irish terms for rain

Irish terms for rain. Source, various.L

What isn’t conveyed is the time dimension. A phrase like “grand soft day thank god” implies that it will continue to rain like this for the remainder of the day, and possibly the season. My simple hand drawn graph fails there.

Next I need to organise a meeting and do a power point presentation for my Austrian colleagues. I will explain to them how I want the to discuss rain in future.

BTW, the terms I collected were: Mildering, heavens open, torrential, lashing, bucketing, needles, “the lad”, mizzle, monsoon, pouring, downpour, dumping, heavy rain, hammering, hooring, spilling, pissing, fat rain, rain, light rain, drop of rain, “grand soft day thank god”, skitting, thin rain, shower, drizzle, spitting, fine mist, and misht.

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