August 2017        

Pay cuts by another name

Dan Taraghan

Karl Marx in Capital (volume 3) stated: “The level of exploitation of labour, the appropriation of surplus labour and surplus value, can be increased by prolonging the working day and making work more intense.”
      The Public Service Stability Agreement, 2018–2020, carries out both these actions. The public service, which employs 300,000 workers, may not be seen by those in the private sector as being subject to the same laws of capitalist exploitation as the private sector, but in fact the two are connected.
      The capitalist class used the financial crisis to attack the pay and conditions of the public sector and to try to drive a wedge between workers in the public and private sectors. Despite causing the crisis in the first place, capitalists and their neo-liberal propagandists claim that the pay, conditions and (especially) pensions in the public sector caused the crisis.
      The attacks on the public sector were a useful diversion for avoiding debate on the whole austerity programme and the distribution of wealth in the country. Weak governments in place since 2007 acquiesced in these attacks, reducing pay, lengthening the working day, and then introducing the so-called FEMPI (Financial Emergency Measures in the Public Interest) legislation.
      This agreement locks in that worse pay and conditions. It copperfastens longer working days, career-average pensions, later retirement and lower wages while claiming to restore pay. It does nothing of the sort.


Following the rejection of Croke Park 2, the Haddington Road Agreement was negotiated. Under the terms of that agreement the working day was increased by an average of 2½ hours a week. This was, in effect, an unpaid prolonging of the working day by 7 per cent, or a decrease in pay by the same amount.
      The Public Service Pay Commission, in its report of May 2017, said that because these additional hours were outside the FEMPI legislation it was outside the remit of its report.
      There have been 15 million unpaid additional hours throughout the public service. The management side refused to budge on the issue. Why should it, as it had already been voted on under Haddington Road?
      The prolongation of the working day is now virtually embedded. The deal offers two options, which make it clear that the additional hours are a pay cut: the option of working the pre-HRA hours with a cut in pay and pension, or sacrificing a portion of holidays above the statutory minimum.
      In effect this would be a sacrifice of about 15 days per annum. Therefore you either work the longer working week with unpaid hours or take a pay cut or give up holidays.

Pay and pensions

The whole point of this agreement was to unwind FEMPI and restore pay. It was well emphasised in the media and the report of the Public Service Pay Commission what would be on offer. The gross public-sector pay bill fell by 9 per cent between 2007 and 2016. Average private-sector pay was 3 per cent above 2008 levels by 2016, whereas average public-sector pay was 8 per cent below for the same period.
      In effect this deal will restore gross pay figures for 90 per cent of public servants to where they were in 2009 by 2020, for the other 10 per cent by 2020 or 2021. By 2020, 73 per cent of public servants will have had a gain of 7 per cent over present levels. Roughly 25 per cent will exit the FEMPI pension levy.
      On the face of it this doesn’t appear to be too bad, until you realise that on average the working week is 2½ hours longer, which is equivalent to about a 7 per cent pay cut; so the gain of 7 per cent on the headline figures is not a gain at all.
      In fact by 2020 not only will there be no gain but, as average inflation since 2010 has been 0.5 per cent, it is a pay cut on the headline figures. If inflation increases further, there is no provision in the agreement for addressing that issue.
      The other major change in unravelling FEMPI occurs in regard to pensions. Under FEMPI there was a “pensions-related deduction,” which had absolutely nothing to do with pensions, despite the name. This was a special levy that applied only to public servants. This is now being renamed the “additional pension contribution.”
      Public servants at present pay €1.2 billion, made up of €500 million in occupational pension contributions and €720 million in pension levy. Post-1995 entrants also pay class A PRSI. Once the pension levy is converted to the additional pension contribution, public servants will be paying 15 per cent plus towards their occupational pensions, without any improvement in pensions.
      This additional pension contribution is purely to appease the neo-liberals, who oppose defined-benefit pension schemes. Post-2011 entrants will be on a career-averaging pension scheme, which in practice will be comparable to a defined-contribution scheme.
      There are also provisions for the retirement age to be pushed up, so that you keep working until you are entitled to the state retirement pension. In other words, you will be a wage slave for most of your life.


Altogether, this is a bad deal for the working class. The ICTU likes to claim that there is about a 6 per cent dividend in pay and conditions from being a union member. This is undoubtedly true at present. However, this deal does not maintain that position.
      For new entrants to the public sector their pay is on a par with the private sector. The value of the pension scheme has been eroded and is now little different from a defined-contribution scheme in the private sector. Instead of setting a benchmark for private-sector employers, the Government has lowered pay and conditions for its own employees to that of the private sector.
      Why, therefore, should people go through the many hurdles in joining the public service when they can get the same pay in the private sector? And why should new entrants join a trade union when union officials negotiate deals like this and try to claim that it restores pay?
      There is growing evidence that new entrants to the public sector are not joining a union. The main pitch of the unions to new recruits now is various discounts on financial products. The unions have become complacent. If union membership declines, the management will use this as an excuse to attack unions, as has happened in Britain.
      This deal shows that the capitalist class has been successful in undermining and overturning the report of the benchmarking body of 2002.

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