EDITORIAL: Pay and pension realities

PUBLIC sector union leaders have an obligation to their members to get the best possible deal for them on pay and conditions. Given that whatever is gained comes from the public purse, expectations also need to be tempered by economic reality, reflecting the circumstances workers in the private sector find themselves in, especially in the area of pensions. 

While public servants took pay cuts and had to contribute some more towards their pensions – which are paid out of current Exchequer expenditure each year – their jobs were secure and all redundancies during the economic downturn were voluntary. Also, their pensions are defined benefit, whereas many workers in the private sector not only lost their jobs, those who held on to theirs saw the values of their pension funds drop dramatically and, in a lot of cases, wiped out altogether.

The unions are looking for public servants’ pay to be restored to boom time levels, but surely even they must realise that these were unsustainable as they were the result of a benchmarking exercise that was more of a vote-buying ploy that helped get Fianna Fáil three consecutive terms in government up to 2011. Nobody is against pay parity to restore equal pay for equal work, but to expect to get back to the heady heights of the Celtic Tiger era is unrealistic, given that the national debt is more than five times greater than it was 10 years ago and we are not yet fully out of the woods as regards our economic recovery.

Certainly, lower-paid public servants need to be looked after in the upcoming pay talks as they struggle to meet the rising cost of living in cities, especially Dublin, where their workplaces are mostly located, but there needs to be some tangible system of measuring productivity to justify pay rises. Also, the number of public servants will need to grow in tandem with the population. 

In the private sector, productivity has increased to help drive the economic recovery but pay rates have not and most workers will be dependent of the State old age pension when they retire because of the sluggish performance of private funds that have no defined benefit. While public sector workers do not qualify for the State pension, their guaranteed benefits are set in stone at quite a considerable cost to the taxpayer that is unsustainable long-term.

Being asked to pay more towards their pensions is not unreasonable and how their guaranteed benefits are calculated also needs to be looked at if these pensions are to be realistic and affordable. Nobody – public or private sector – wants to have to live their twilight years in penury, but everybody needs to be realistic about pension costs well into the future, especially with an increasing older population to be catered for.