ECONOMICS:More jobs are being lost in the private sector and among the self-employed as pay and hours get cut

THE DEBATE on public-sector reform usually generates more heat than light. This is unsurprising as the matter directly affects such a large number of people.

In the public sector, many rail against pay cuts and ask why they should pay for a crisis that they did not cause. In the private sector, those who create wealth believe that paying more taxes to sustain the public sector is not only wrong, but self-defeating. Both sides have a point.

The already fraught debate is muddied by complexity. Changing the way any organisation functions – including ones in which just a handful of people work – is a complicated business, even for those engaged in it on a full-time basis.

Changing an entity employing up to 350,000 people in hundreds of different roles and functions is nightmarishly complex.

However reforming, restructuring and down-sizing the institutions of the State is unavoidable and necessary – unavoidable because they were expanded on the basis of bubble-era revenues that have disappeared, necessary because a more efficient State apparatus can assist in economic regeneration by, among other things, designing and implementing intelligent policies.

New figures this week on jobs and pay levels in both sectors add to our understanding of developments in the public sector and how they compare with the private sector. These facts may help illuminate the debate.

The most comprehensive comparisons come from the Earnings, Hours and Employment Costs survey, first taken in the opening quarter of 2008 by the Central Statistics Office.

As the final quarter of 2007 marked the height of the boom in employment terms, the survey gives a good overview of the three years since things really went pear-shaped in the jobs market.

The numbers in private-sector employment (excluding the self-employed) have declined by a fraction under 17 per cent in the three years to the final quarter of last year. That amounts to more than one in every six jobs that existed at the end of 2007. This is an horrific rate of attrition.

By contrast, public sector employment shrank by just 3.3 per cent over the same three-year period (seperate Department of Finance figures show a similar, if smaller decline in public sector numbers in the three years to the end of 2010).

In other words, just one in 30 taxpayer-funded jobs has disappeared. Such a marginal change is surprising given both natural wastage and a hiring moratorium.

Separate but almost perfectly comparable figures (from the Quarterly National Household Survey) show that the numbers working for themselves have declined by more than either kind of employee, falling by slightly more than 17 per cent.

And this comes despite the likely move of many laid-off employees into self-employment as consultants and the like. It has been a brutal time to be in business.

In terms of security of tenure at work, it is very clear that the public and private sectors are incomparable with the former continuing to enjoy full protection and the latter enduring huge uncertainty.

If the two sectors inhabit different worlds when it comes to job security, the difference on pay is much smaller, as the chart illustrates.

Despite much talk about falling incomes during the recession, the earnings, hours and employment costs survey pay statistics suggest that change has been limited.

Employees in the private sector have experienced a decline in average weekly earnings of 2.8 per cent from the beginning of 2008 until the end of 2010, while their counterparts in the public sector have seen a marginal increase of 0.9 per cent over the same period.

The public sector figures may surprise given historically unprecedented pay cuts in 2010.

The figures show that, in the public sector, there was an unusually large fall in the first three months of last year, but this mostly offset earlier increases. And average earnings increases since then have clawed back the remainder.

Weekly earnings rose from a three-year low point of €882 a week in the first quarter of 2010 to €913 in the final quarter.

For reference, in the final quarter of 2010, weekly earnings in the private sector were almost one-third lower, at €625.

It should be added that, when measured by hourly pay rates, the private sector has seen a rise (1.2 per cent) over the same period, while the public sector has registered a smaller decline (-0.7 per cent).

However, average weekly earnings are a better indicator of people’s overall incomes because they account for changes in hours worked.

Those fortunate enough to have kept their jobs in the private sector have seen their hours cut by almost 4 per cent over the past three years, while public servants are actually putting in longer hours.

The most obvious conclusion to be drawn from the data on jobs and pay is that the private sector has suffered much more from the recession than the public sector.