Public sector workers in Ireland earn 40 per cent more on average than their counterparts in the private sector, and that is before any allowance for their pension entitlements and job security is made, new research has found.

The report by Dublin-based stockbroker Davy found that average public sector wages amounted to €47,400 in Ireland. This compared with €33,900 in the private sector. This excludes any allowance for pensions or job security.

Davy’s calculations indicated that a private sector worker would need to save €590,000 to buy an annuity on retirement that matched public sector career-average salary pensions of €23,000 a year. The figures would be higher for those with defined benefit pensions linked to their final salary.

Davy’s report – called Public Sector Pay – Avoiding the Mistakes of the Past – noted that the overall size of the public sector pay bill this year is set to rise to €20.6 billion, a level last seen in 2008, the year when the banking and property markets crashed in Ireland .

This is in spite of the fact that employment in the public sector in Ireland has fallen to 368,100 currently from a peak of 427,300 in 2008.

Davy said that at most around half of this pay gap between public and private sector workers could be attributed to differences in education, experience, qualifications and other factors.

It also noted that public servants in Ireland were better paid on average than their counterparts in many other European countries. In the UK, average public sector wages are £26,200 (€30,800), which is on a par with what their counterparts in the private sector receive.

Irish public sector workers in public administration and defence, education, and human health and social work activities were the highest paid in the euro zone.

Highest average pay

The Davy calculations included a myriad of allowances, reliefs and other payments.

In the private sector the highest average annual earnings were in information and communications at €56,200, with the lowest being in hotels and restaurants at €17,300.

In October of last year the Government established an independent Public Service Pay Commission to advise it on public service pay. It is due to provide an initial report to Government in the second quarter of this year.

Davy recommended that any new public sector pay deal to succeed the current Lansdowne Road Agreement should only commit to pay rises in line with the private sector. It said any increases should be conditional on the ongoing performance of the economy and tax revenues to guard against the risks posed by Brexit, corporate tax reform and other uncertainties.

Davy also argued for the value of pensions to be included in any comparison of public and private sector pay.

Negotiations

“Ours is a dispassionate piece of research that takes no account of the validity of individual relativity claims across the public sector. It may be that some public sector workers warrant higher increases than others and that is for others to evaluate.

“Our core view is that overall public sector pay and benefits are unsustainably higher than the private sector, and upcoming pay talks should not exacerbate that.”

The Davy study is at odds with a recent Central Statistics Office (CSO) paper which found that public sector workers are paid slightly less than their private-sector counterparts overall. That research said that those at the bottom of the income ladder tend to be better off in the public sector while those at the top earn more in the private sector.