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Mind the gap ... or we will fall into an economic trap

Recently released data on civil service pay generated an article in the Belfast Telegraph (July 27, 2012), the headline of which emphasised an advantage in civil service over private sector pay. The article also stated 'this clear public/private differential will anger business leaders who have long argued that they are unable to compete with higher public sector wages'.

Nipsa believes coverage of this issue should acknowledge the difficulty of sectoral comparisons and the real reason for such a gap in Northern Ireland.

On the first point, as the Institute of Fiscal Studies (IFS) states, 'The raw differential [between public and private sector pay] does not take into account the fact that the skill compositions of the two sectors are markedly different: it is like using the average pay of neurosurgeons and the average pay of bartenders to conclude neurosurgeons are overpaid.'

Or as one analyst, summing up his weariness about the wilful misuse of this pay-gap data has said: "Unless commentators want to close hospitals, schools and police forces, they should stop complaining about the difference in average pay".

Nipsa, the Irish Congress of Trade Unions and the TUC, using IFS data have previously highlighted the broad features of pay in the public and private sector. These are:

n Less pay inequality in the public sector - those at the bottom being paid slightly more, those at the top getting less than the private sector equivalent;

n More unskilled workers on the minimum wage are employed in the private sector while the public sector has a high proportion of professionally qualified workers (such as teachers and doctors).

n Earnings tend to increase with age and experience therefore the higher proportion of older employees in the public sector will be reflected in pay data.

The 2011 Annual Survey of Hours and Earnings (ASHE) from the Northern Ireland Statistics and Research Agency (NISRA) highlighted the continuing pay gap between employees in Northern Ireland and those in the UK.

NISRA highlighted that the median gross weekly wage of full-time workers in Northern Ireland was the lowest of any region in the UK - 10% below the UK equivalent.

Medium gross annual earnings for full-time employees was 12% below the UK equivalent.

Most dramatically private sector earnings in Northern Ireland are 17.8% below the UK average with "the public-private pay differential ... greatest in Northern Ireland ... primarily due to low private sector wages within the region".

In this context the angry business leaders should spend less time pleading for tax breaks for transnationals in the form of a cut in corporation tax and direct their energies towards ending the injustice of Northern Ireland having the highest number of minimum wage jobs in the UK.

The real story on pay is about a gap but it is not the explicable one between sectors but an entirely unjustifiable one between the tip of the pyramid and the rest. As the High Pay Commission has commented "pay at the top has spiralled to stratospheric levels". This is reflective in an economic strategy that underwrites and undertaxes the excesses of the City of London.

The prominence of 'pay gap crisis' stories, over the last 18 months has suggested an ulterior motive - that of softening up public opinion prior to the introduction of regional pay. This would be a recipe for unregulated disaster.

The Trade Union movement warned that the 'austerity fetish' would attempt to divide and rule - public against private sector. This is the divisive strategy that has led us into a double dip recession and only offers a 'race to the bottom' as a way out.

In a week when both the Northern Bank and PriceWaterhouseCoopers' economic forecasts highlighted significant job losses, we doubt real businesses are angry about the life support system that the public sector is providing for a mixed and mutually dependent local economy.