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The public-private
sector pay debate
EPSU
Collective Bargaining Conference 2015
Brussels, 13-14 January 2015
Torsten Müller (ETUI) & Thorsten Schulten (WSI)
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Public sector wages and the EU crisis
management
13 01 2015 Torsten Müller & Thorsten Schulten
Basic assumption: Debt and
Competitiveness crisis
1. Austerity: public sector wage
cuts to reduce public spending to stabilize state
budgets and to reassure bond markets
2. “Structural reforms“ to improve cost
competitiveness by ensuring moderate wage
developments in the private sector
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Public sector pay and private sector
competitiveness
13 01 2015 Torsten Müller & Thorsten Schulten
Key argument:
Excessive wage developments
in public sector drive up wages
In exposed private sector thereby
undermining cost competitiveness
European tools to keep public sector pay down:
Euro-Plus Pact 2011
Country-specific recommendations
Memoranda of understanding
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Underlying assumptions of policy to
cut and freeze public sector pay
13 01 2015 Torsten Müller & Thorsten Schulten
1.) There is excessive wage
development leading to
“unjustified” wage premium
2.) There is public sector wage
leadership driving up private sector wages
3.) Improving cost competitiveness is the key to
get out of the crisis
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Literature on public-private sector
pay gap
13 01 2015 Torsten Müller & Thorsten Schulten
Public sector pay premium in many
western European countries
plus Slovenia
Public sector pay penalty in CEE
countries plus France, Denmark and Finland
Results are diverse and often inconsistent
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Methodical problems of comparisons
13 01 2015 Torsten Müller & Thorsten Schulten
Factors that explain variations
in findings on pay gaps:
Data sources and methods
Definition of public sector
Time period covered
Type of wages considered: hourly vs. monthly
wage
Difficulty to assess the whole pay package:
problems of fringe benefits and non-monetary
components
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Public-private sector wage gap 2012 Public sector wages in % of private sector wages
13 01 2015 Torsten Müller & Thorsten Schulten
Year
Month
Hour
Year
Month
Hour
Czech Rep. 95.7 95.7 96.5 Bulgaria 96.1 96.2 101.0
Denmark 86.0 86.0 92.6 Netherlands 96.1 96.1 109.1
Estonia 87.6 87.7 91.3 Poland 99.7 99.7 115.7
Germany 91.9 91.9 92.3 Spain 99.0 99.0 109.4
Finland 87.8 87.8 94.0 UK 98.4 98.4 101.5
France 80.9 80.9 86.3 Croatia 108.8 108.8 111.1
Hungary 80.5 80.5 81.2 Cyprus 100.1 100.1 111.1
Latvia 90.2 90.2 92.5 Ireland 116.1 116.1 134.4
Romania 88.9 89.0 90.0 Italy 100.0 100.0 117.4
Slovakia 82.6 82.5 86.8 Lithuania 105.3 105.3 112.0
Luxembourg 102.7 102.7 109.7
Portugal 106.9 106.9 116.7
EU 28 93.3 93.3 98.9 Slovenia 107.0 107.0 109.6
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Is there public sector
wage leadership?
13 01 2015 Torsten Müller & Thorsten Schulten
Previous studies from ECB and
DG ECFIN:
Results are rather
differentiates and often
inconsistent
Often a mutual influence of private and
public sector wage developments
Private sector leadership is more common !
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Public and private sector wages in
Greece, 2001-2013 (in % points)
13 01 2015 Torsten Müller & Thorsten Schulten
Private Sector: NACE Code B-N (Business economy)
Public Sector: NACE Code O-S (Public administration and defence; compulsory social security; education; human health and social
work activities; arts, entertainment and recreation)
Source: Eurostat Labour Costs Index, calculations by the authors
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Public and private sector wages in
Portugal, 2001-2013 (in % points)
13 01 2015 Torsten Müller & Thorsten Schulten
Private Sector: NACE Code B-N (Business economy)
Public Sector: NACE Code O-S (Public administration and defence; compulsory social security; education; human health and social
work activities; arts, entertainment and recreation)
Source: Eurostat Labour Costs Index, calculations by the authors
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Public and private sector wages in
Germany, 2001-2013 (in % points)
13 01 2015 Torsten Müller & Thorsten Schulten
Private Sector: NACE Code B-N (Business economy)
Public Sector: NACE Code O-S (Public administration and defence; compulsory social security; education; human health and social
work activities; arts, entertainment and recreation)
Source: Eurostat Labour Costs Index, calculations by the authors
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Public and private sector wages in the
UK, 2001-2013 (in % points)
13 01 2015 Torsten Müller & Thorsten Schulten
Private Sector: NACE Code B-N (Business economy)
Public Sector: NACE Code O-S (Public administration and defence; compulsory social security; education; human health and social
work activities; arts, entertainment and recreation)
Source: Eurostat Labour Costs Index, calculations by the authors
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Differences in public and private sector
wage growth, 2001-2009 (in % points)
13 01 2015 Torsten Müller & Thorsten Schulten
Private Sector: NACE Code B-N (Business economy)
Public Sector: NACE Code O-S (Public administration and defence; compulsory social security; education; human health and social
work activities; arts, entertainment and recreation)
Source: Eurostat Labour costs Index, calculations by the authors
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Differences in public and private sector
wage growth, 2001-2013 (in % points)
13 01 2015 Torsten Müller & Thorsten Schulten
Private Sector: NACE Code B-N (Business economy)
Public Sector: NACE Code O-S (Public administration and defence; compulsory social security; education; human health and social
work activities; arts, entertainment and recreation)
Source: Eurostat Labour Costs Index, calculations by the authors
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Differences in public and private sector
wage growth, 2010-2013 (in % points)
13 01 2015 Torsten Müller & Thorsten Schulten
Private Sector: NACE Code B-N (Business economy)
Public Sector: NACE Code O-S (Public administration and defence; compulsory social security; education; human health and social
work activities; arts, entertainment and recreation)
Source: Eurostat Labour Costs Index, calculations by the authors
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Findings of analysis of recent figures
13 01 2015 Torsten Müller & Thorsten Schulten
No clear evidence for claim of public sector
pay premium: diverse picture
No clear evidence for public sector wage
leadership in pre-crisis period: mixed picture
Pressure on public sector wages during
crisis: public sector wages much harder hit
than private sector wages
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Policy implications
13 01 2015 Torsten Müller & Thorsten Schulten
Cutting public sector wages
to improve private sector
competitiveness and to boost
exports not promising
No empirical evidence for public sector wages
undermining competitiveness
Narrow focus on cost competitiveness
Narrow conception of role of wages
Overestimating role of exports for growth
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Alternative
approach…
13 01 2015 Torsten Müller & Thorsten Schulten
A strong public sector
to boost aggregate demand
to provide a modern public
infrastructure as a major
precondition for a
competitive economy
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13 01 2015 Torsten Müller & Thorsten Schulten
Thank you very much for your attention!!!
Dr. Torsten Müller Dr. Thorsten Schulten
ETUI WSI
Bld. du Roi Albert II, 5 Hans-Böckler-Straße 39
1210 Brussels 40476 Düsseldorf
Belgium Germany