Public-P i a e Wage Di e en ials in I eland, 1994-2001
By
Ge y Boyle, Ro y McElligo and Jim O’Lea y *
Na ional Uni e si y o I eland, Maynoo h
Co esponding au ho : P o esso Ge y Boyle,
[email p o ec ed]
Abs ac
A e public sec o wo ke s in I eland paid mo e han p i a e sec o
employees, when such di e ences in p oduc i i y- ela ed pe sonal
a ibu es and job cha ac e is ics a e con olled o ? We es ima e
ha in 2001 he p emium enjoyed by public se an s was abou 13
pe cen . We ind ha he p emium, is signi ican ly bigge o
hose nea he bo om o he ea nings dis ibu ion han o hose
nea he op, was signi ican ly bigge o women han men in he
mid-1990s bu no a he end o he 1990s, and does no a y
signi ican ly ac oss di e en le els o educa ional a ainmen . We
es ima e he p emium o 2001 o be no signi ican ly di e en
om ha es ima ed o 1994 despi e his pe iod a pe iod o
excep ionally apid ou pu and employmen g ow h, and
co espondingly sha p igh ening o labou ma ke condi ions in
he I ish economy. The mos ema kable di e ence be ween ou
esul s and hose o o he esea che s o o he coun ies ela es o
he absolu e size o he p emium. A numbe o possible
explana ions o his di e ence a e discussed.
* An ea lie e sion o his pape was p esen ed a he I ish Economic Associa ion
Annual Con e ence in Bel as in Ap il 2004. The au ho s would like o acknowledge
he help ul commen s and assis ance o hei colleagues Denis Conni e and Donal
O’Neill and pa icipan s a a depa men al semina a NUI Maynoo h. Any e o s
a e ou own esponsibili y.
JEL codes: J31, J45
Key wo ds: public, p i a e, wage, di e en ials, I eland
2
Public-P i a e Wage Di e en ials in I eland, 1994-2001
1. In oduc ion
Public sec o pay is a ma e o conside able policy in e es . A he
mac oeconomic le el, he public sec o pay bill is a la ge elemen
o go e nmen expendi u e, accoun ing o up o 70 pe cen o
gene al go e nmen consump ion spending in some OECD
coun ies (see Ju ges (2001)). As such, public sec o pay is an
impo an d i e o he o e all ax bu den.
A he mic oeconomic le el, a es o pay in he public sec o ha e
an impo an bea ing on he ec ui men , e en ion and mo i a ion
o public se an s and, by ex ension, on he quali y o public
se ices. A he same ime, public sec o pay a es may in luence
a es o pay in he p i a e sec o and in his way oo a ec he
in e na ional compe i i eness o he economy.
Re lec ing hese conce ns, he design o public sec o pay
de e mina ion sys ems is an ongoing p eoccupa ion o policy-
make s. The challenge is o iden i y and implemen mechanisms
ha a e capable o deli e ing ou comes ha mee bo h e iciency
and equi y c i e ia. Consequen ly, ecen de elopmen s in his
ield, in I eland and elsewhe e, ha e sough o ins i u e
a angemen s ha link a es o pay in he public sec o mo e
di ec ly o p i a e sec o a es.
In andem wi h hese de elopmen s, an in e na ional body o
esea ch has eme ged which ocuses on he ope a ion o public
sec o labou ma ke s. An impo an s and o ha esea ch has
sough o quan i y public-p i a e sec o wage di e en ials, o
explo e hei pa e n ac oss he ea nings dis ibu ion, educa ional
a ainmen le els and occupa ions, and o analyse hei mo emen
o e ime.
3
This pape is pa o ha s and o esea ch and, as a as
me hodology is conce ned, d aws i s inspi a ion om i . To ha
ex en , i is conce ned wi h simply applying a well- ied se o
econome ic echniques o he analysis o public-p i a e sec o
ea nings di e en ials in I eland, ocusing on he pe iod om 1994
o 2001. Howe e , he e a e aspec s o he I ish expe ience,
speci ically i s economic pe o mance du ing he 1990s and
ins i u ional ea u es o i s pay ba gaining sys em, ha make an
ex ension o his esea ch o he I ish case a ma e o especial
in e es .
The pape is o ganised as ollows. In Sec ion 2 we desc ibe he
economic and ins i u ional backg ound agains which public sec o
pay has e ol ed in I eland o e he pas decade o so. In Sec ion 3
we discuss some o he con ibu ions o he ecen in e na ional
li e a u e on public-p i a e sec o ea nings di e en ials. In Sec ion
4 we desc ibe he da ase we use o analyse public-p i a e sec o
wage di e en ials in I eland. In Sec ion 5 we epo ou main
esul s, and in Sec ion 6 we summa ise ou main indings and
d aw some conclusions.
2. The I ish Con ex
The I ish economy expe ienced apid g ow h o ou pu and
employmen du ing he 1990s. Be ween 1993 and 2001 eal GDP
doubled while GNP inc eased a an a e age annual a e o almos
8 pe cen in eal e ms. O e he same pe iod, o al employmen in
he economy inc eased by a cumula i e 45 pe cen , o a an
annual a e age a e o almos 5 pe cen (Table 1).
The p incipal coun e pa o his igo ous expansion o
employmen was an inc ease in he labou o ce which, hanks o a
combina ion o s ong na u al inc ease, ising emale pa icipa ion
a es and he eme gence o ne inwa d mig a ion, ose by 3 pe
cen pe annum on a e age be ween 1993 and 2001 (Table 1).
Unemploymen also declined sha ply, wi h he unemploymen a e
alling om 15.7 pe cen in 1993 o 3.6 pe cen in ea ly 2001.
Table 1: Labou o ce ends, I eland, 1993 and 2001
4
(000s) 1993 2001
To al Employmen 1,183 1,717
Unemploymen 220 65
Labou Fo ce 1,403 1,782
Unemploymen Ra e (%) 15.7 3.6
Sou ce: Budge a y and Economic S a is ics, Depa men o Finance, I eland.
Some o he c edi o I eland’s economic pe o mance du ing he
1990s has been gi en o he so-called sys em o “social
pa ne ship” ha has been an in eg al pa o he coun y’s
ins i u ional a chi ec u e h oughou he pe iod. This sys em b ings
oge he he go e nmen and o ganisa ions ep esen ing employees
and employe s in a policy-o ien ed dialogue, he pu pose o which
is o ind common g ound in ela ion o social and economic
objec i es and he means o a aining hem. The main ou come o
he sys em has been a se ies o h ee-yea p og ammes se ing ou
ag eed policies ac oss a ange o issues1.
A he co e o each o hese pa ne ship p og ammes has been a
cen alised wage ag eemen , cha ac e ised by b oadly simila pay
inc eases ac oss he public and p i a e sec o s. Go e nmen has
pa icipa ed in hese ag eemen s, no only in i s capaci y as
employe , bu also in i s ole as iscal au ho i y. This has allowed
he wage ag eemen s o inco po a e commi men s by go e nmen
in ela ion o income ax educ ions.
In simple e ms, he logic behind he p oposi ion ha social
pa ne ship played a key ole in he expansion o he I ish
economy du ing he Cel ic Tige e a uns as ollows: pa ne ship
pe mi ed ax educ ions which acili a ed wage mode a ion which
in u n imp o ed cos compe i i eness and boos ed ou pu and
employmen . O cou se, p oponen s o he social-pa ne ship
model claim o he condui s o causa ion as well, such as he
posi i e e ec s o pa ne ship on he indus ial ela ions clima e
1 These p og ammes and he pe iods o which hey applied we e as ollows. The
P og amme o Na ional Reco e y (1988-1990); The P og amme o Economic and
Social P og ess (1991-1993); The P og amme o Compe i i eness and Wo k (1994-
1996); Pa ne ship 2000 (1997-2000); and The P og amme o P ospe i y and Fai ness
(2000-2002). The cu en p og amme, Sus aining P og ess, co e s he pe iod 2003-
2005. All o hese p og ammes a e published by Go e nmen Publica ions, S a ione y
O ice, Dublin.
5

and i s con ibu ion o he p edic abili y o labou cos s. The poin
is ha , wha e e he condui and wha e e he logic, he belie ha
social pa ne ship is a aluable pe o mance-enhancing ins i u ion
is a e y s ong one in policy-making ci cles2.
Undoub edly, educ ions in income ax, h ough hei e ec on
labou supply, played a ole in ensu ing low a es o wage in la ion
in he I ish economy, a leas in he ea ly Cel ic Tige yea s.
Howe e , by he la e 1990s, igh ening labou ma ke condi ions
had s a ed o exe clea upwa d p essu e on wage se lemen s.
Inc easingly, wage inc eases exceeded he no m se ou in he
cen alised ag eemen . Fo example, Pa ne ship 2000 – he
p og amme ha co e ed he pe iod om 1997 h ough 1999 –
p o ided o a e age annual inc eases o 2.2 pe cen in basic pay
ac oss he public and p i a e sec o s, bu by 1999 ac ual inc eases
in ea nings ac oss many a eas o he economy we e unning a
o e 6 pe cen . Amongs cons uc ion wo ke s, wage in la ion was
unning a double-digi a es by 1999.
Agains his backg ound a numbe o conce ns eme ged on he
pa o public sec o employees and employe s. One was ha
public sec o wo ke s we e being le behind in pay e ms by hei
p i a e sec o coun e pa s. This pe cep ion appea s o ha e been
based mo e on anecdo al e idence han on he a ailable s a is ical
e idence3. None heless, i helped o c ea e a sense o g ie ance
amongs public sec o wo ke s, and also aised conce ns abou he
2 A ai ly ypical iew is he ollowing om he Depu y P ime Minis e and Minis e
o En e p ise, T ade and Employmen , Ms. Ma y Ha ney T.D.:
“Social pa ne ship has been a majo ac o unde pinning I eland’s economic and
social p og ess since he la e 1980s. I has played a i al ole in inc easing employmen
… I has helped deli e sus ained and sus ainable inc eases in ou s anda ds o li ing.
Abo e all, i has con ibu ed o ou dynamism and ou con idence ha we can
success ully ackle common p oblems.” (Speech o Manpowe I eland G oup Eu opean
Business Leade s’ B eak as , Dublin, Ap il 2002.)
3 I ish CSO da a show ha be ween 1996 and 2000, o example, a e age weekly
ea nings inc eased a an annual a e age a e o 4.9 pe cen o public sec o wo ke s.
The equi alen a es o inc ease o indus ial wo ke s and employees o banks,
insu ance companies and building socie ies we e 5 pe cen and 4.1 pe cen
espec i ely. All o hese g oups expe ienced a lowe a es o inc ease han
cons uc ion wo ke s: be ween 1996 and 2000 skilled cons uc ion wo ke s enjoyed
a e age weekly ea nings’ g ow h o o e 10 pe cen pe annum.
6
capaci y o o ganisa ions in he public se ice o ec ui , e ain and
mo i a e s a .
A he same ime he e was g owing disenchan men wi h he
exis ing public sec o pay de e mina ion sys em. This was a
sys em ha heo e ically p o ided o mos a es o pay o be
benchma ked agains he p i a e sec o , wi h ela i i ies wi hin he
public sec o supposedly playing a modes suppo ing ole. In
p ac ice, howe e , he sys em had e ol ed o he poin whe e he e
we e compa a i ely ew g ades whose pay was de e mined by
di ec e e ence o p i a e sec o compa a o s, and a g ea numbe
o g ades whe e in e nal ela i i ies we e he main de e minan s4.
The esul ing sys em had become igid and in lexible, mili a ed
agains he disc e e ea men o indi idual g ades and
occupa ions, and had an inhe en endency o gene a e wage-wage
spi als.
Agains his backg ound, he I ish go e nmen , oge he wi h he
social pa ne s, es ablished he Public Se ice Benchma king Body
(PSBB) in July 2000. The pu pose o he PSBB was o examine
pay and jobs in he public sec o o hose g ades no co e ed by
he Buckley Re iew G oup5, and o make ecommenda ions in
ela ion o a es o pay based, acco ding o he Body’s e ms o
e e ence, on ‘in-dep h and comp ehensi e esea ch and analysis
o pay le els ac oss he p i a e sec o ’.
The backg ound o he es ablishmen o he PSBB is deal wi h
mo e ully in O’Lea y (2002). Fo p esen pu poses, one aspec o
i s manda e is especially dese ing o no e, namely he scope o
he exe cise. While i was no asked o examine e e y single
public sec o g ade, he numbe o g ades ha did come di ec ly
wi hin i s emi co e ed 145,000 public sec o employees o o e
4 Amongs he g ades whe e emune a ion was explici ly benchma ked o he p i a e
sec o we e hose a he e y op o he public-sec o hie a chy. Pay a es o hese
g ades ha e been de e mined o many yea s now by he Re iew Body on Highe
Remune a ion in he Public Sec o ( he “Buckley Re iew G oup”). The mos ecen
epo o his g oup was published in 2000 (Go e nmen Publica ions, he S a ione y
O ice, Dublin).
5 See p e ious oo no e.
7
60 pe cen o he o al. The e is no in e na ional p eceden ha we
a e awa e o o a benchma king exe cise o his scale o scope.
The PSBB epo ed in June 2002. I ecommended pay inc eases
o e e y g ade i e iewed, anging om 3 pe cen in he case o
labo a o y echnicians and hi d-le el lec u e s o 25 pe cen o
ce ain g ades o pa amedic, and a e aging jus unde 9 pe cen
o e all. The cos o implemen ing i s ecommenda ions is
es ima ed a €1.1bn annually, o abou 3.5 pe cen o annual ne
cu en go e nmen expendi u e. Implemen a ion is now in ain
and, subjec o condi ions ela ing o changes in wo k p ac ices
and he like being ul illed, he PSBB’s ecommenda ions will
ha e been ully deli e ed by ea ly 2005.
A cu ious ea u e o he PSBB’s epo is ha i u nished no
speci ic jus i ica ion o any o he pay inc eases i p oposed.
Ins ead, i p o ided a gene alised a ionale o i s co pus o
ecommenda ions ha echoed i s e ms o e e ence and ci ed a
numbe o b oad conside a ions. A no s age he e o e did he
PSBB indica e ha i s pay ecommenda ions, ei he in gene al o
in pa icula , a ose because o a pay gap be ween he public and
p i a e sec o s and he pe cei ed need o b idge such a gap. In his
espec he PSBB’s app oach di e ed ma kedly om ha o he
Buckley Re iew G oup, whose 2000 epo con ained explici and
unambiguous s a emen s o he e ec ha sala ies o op public
se ice pos s we e subs an ially ou o line wi h hose o
compa able posi ions in he p i a e sec o .
S ill, he imp ession ha he PSBB’s esea ch showed ha he
gene ali y o public sec o g ades we e unde paid ela i e o hei
p i a e sec o coun e pa s, and ha such esea ch esul s o med
pa o he a ionale o he pay ecommenda ions made by he
PSBB, has been p opaga ed by in luen ial igu es, including public
sec o ade-union leade s6. I is no possible o es he alidi y o
6 Fo example, Pe e McLoone, Gene al Sec e a y o he IMPACT ade union,
esponded o he PSBB’s epo by saying: “The ou come has indica ed IMPACT’s
iew ha public se ice pay ell behind du ing he economic boom” (see he IMPACT
websi e a www.impac .ie) The Execu i e Commi ee o ano he public se ice union,
he Associa ion o Highe Ci il and Public Se an s, esponded as ollows: “The
independen Benchma king Body has clea ly es ablished ha public sec o
8
hese imp essions since he PSBB’s esea ch has no been
published.
One objec i e o his pape , he e o e, is o examine he e idence
on he ex en o he pay gap be ween public and p i a e sec o
wo ke s a he ime he PSBB’s esea ch was ca ied ou and how
ha gap e ol ed o e he p eceding yea s. Ano he objec i e is o
si ua e he I ish e idence in he con ex o he in e na ional
li e a u e on his issue. To his end, we use a a ie y o
econome ic echniques o in es iga e he size, na u e and
dynamics o public-p i a e sec o pay di e en ials in I eland
du ing he 1994-2001 pe iod, and o compa e and con as he I ish
expe ience in his ega d wi h he in e na ional expe ience.
3. Some ecen in e na ional indings
To ou knowledge, he kind o analysis we ha e unde aken has
ne e be o e been ca ied ou on I ish da a. Howe e , as no ed
abo e, a conside able olume o esea ch along hese lines has
been unde aken o o he coun ies. Good e iews o he li e a u e
and o he me hodological issues ha a ise a e con ained in
Gunde son (1998) and G ego y and Bo land (1999). A b ie
summa y o me hodology and p incipal esea ch indings ollows.
Ul ima ely, he ques ion ha he bulk o his esea ch a emp s o
answe is whe he employees who a e iden ical in all ma e ial
espec s would ea n mo e by wo king in he public han he p i a e
sec o . The gene ic me hod used o add ess his ques ion in ol es
compa ing he ea nings o indi idual wo ke s, con olling o
di e ences in p oduc i i y- ela ed cha ac e is ics and job
a ibu es, ac oss he wo sec o s. This ypically in ol es
es ima ing eg ession equa ions wi h some measu e o ea nings as
he dependen a iable, and wi h a se o explana o y a iables
designed o cap u e p oduc i i y- ela ed pe sonal a ibu es (such
as age, expe ience and educa ion) and job cha ac e is ics (such as
emune a ion is behind, and in some cases subs an ially behind, equi alen p i a e
sec o emune a ion and he ai a e o he job” (see he AHCPS websi e a
www.ahcps.ie)
9
g ea many employees, and ce ainly no o he majo i y o
manage ial, p o essional and echnical wo ke s.
Acco dingly, we use g oss mon hly ea nings in ou co e
speci ica ion. Howe e , we also es he impac o employing he
hou ly measu e. Since a e age weekly hou s wo ked a e highe in
he p i a e sec o , he gap in hou ly ea nings be ween he wo
sec o s is wide han he gap in mon hly ea nings.
A sho coming o ou ea nings a iable, common o o he s udies
in his ype, is ha i excludes impo an elemen s o emune a ion
such as pension en i lemen s, bene i s-in-kind and pe o mance-
ela ed pay. As a as he la e is conce ned, he e is a se ies in he
ECHP da ase called ‘o he ea ned income’, bu i is a de icien
measu e o pe o mance- ela ed pay in ha i includes lump-sum
paymen s such as edundancy paymen s, back-da ed pay inc eases
and he like. The e a e no da a in he ECHP ela ing o pension
en i lemen s, so i is simply no possible o cons uc a measu e o
emune a ion ha inco po a es he alue o pensions. The same
applies o bene i s-in-kind.
O cou se, he e a e o he dimensions o a job ha , while no pa
o he emune a ion package, a e alued by employees. An
ob ious one, especially ele an o an analysis o public-p i a e
sec o pay di e en ials, is job secu i y. In gene al, public sec o
employmen is mo e secu e han p i a e sec o employmen : he
concep o ‘a job o li e’ is much mo e p e alen in he public
han he p i a e sec o , and he isk o losing one’s job is much
lowe . The e is no way o adjus ing ou dependen a iable o
e lec his di e ence.
4.3 The explana o y a iables
All he independen a iables ha a e ypically used in his kind o
analysis a e eadily a ailable in some o m o o he om he
ECHP da ase . Responden s a e asked hei age, gende and
ma i al s a us. These a e s aigh o wa d and equi e no
16

elabo a ion. Responden s a e also asked whe he hey su e om
any ch onic disabili y and, since his is an ob ious po en ial
in luence on p oduc i i y, we ha e used i as an independen
a iable.
The educa ion a iable in Mince ean equa ions is usually ei he a
‘comple ed yea s o educa ion’ o a ‘highes le el o educa ion
a ained’ a iable. The o me is p e e able on g ounds o
g anula i y. Howe e , he ECHP da a se does no yield a
sa is ac o y a iable o his ype, so we ha e been cons ained o
use an a ainmen a iable ha dis inguishes be ween h ee le els
o comple ed educa ion: lowe second-le el; uppe second-le el;
and hi d-le el (deg ee o o he hi d-le el quali ica ion). In
epo ing ou esul s below, hese a e designa ed as Le el 1, Le el
2 and Le el 3 espec i ely. Ou educa ion a iable he e o e, does
no dis inguish be ween di e en hi d-le el quali ica ions and,
since he span he e is e y wide ( om ce i ica es ea ned a e a
wo-yea cou se a an Ins i u e o Technology o a Ph.D. ea ned
a e up o en yea s s udy a a uni e si y), his is no en i ely
sa is ac o y.
A wo k-expe ience a iable is also ypical in Mince ean equa ions.
Concep ually, he e a e se e al op ions he e, one being he o al
yea s wo ked by an indi idual ac oss all employmen s (a measu e
o o al wo k expe ience); ano he being yea s wo ked by an
indi idual in his/he cu en employmen (a measu e o job-
speci ic expe ience). The Li ing in I eland Su ey (LIS), om
which he ECHP is de i ed, yields da a ha allow a measu e o he
o me ype o be cons uc ed. This is no he case wi h he ECHP
da a se . As a esul , we a e cons ained o using a measu e o he
la e ype, which is a guably in e io . Howe e , gi en ha we also
use age as an explana o y a iable, we do no hink his poses a
se ious p oblem.
The a iables discussed so a - age, gende , ma i al s a us,
disabili y, educa ion and expe ience – e lec indi iduals’
p oduc i i y- ela ed a ibu es. We ha e also used a iables ha
ela e o job cha ac e is ics: uni size; occupa ion; con ac ype
and pa - ime s a us. As a as uni size is conce ned, he ECHP
con ains in o ma ion on he numbe o people wo king in he
17
es ablishmen whe e he indi idual esponden is cu en ly
employed. The a iable is s a i ied in o six size anges om less
han h ee up o 500-plus. The con ac - ype a iable dis inguishes
be ween pe manen , ixed- e m and casual con ac s.
As o occupa ion, we dis inguish be ween he ollowing
ca ego ies: ‘manage ial’ (including legisla o s and senio
o icials); ‘p o essional’; ‘ echnical’; ‘cle ical’; ‘se ice’
(including sales wo ke s); ‘c a ’; ‘ope a i es’ (including assembly
wo ke s), and ‘elemen a y’ (including unskilled labou e s).
4.4 Di e ences be ween he sec o s
On a e age, he public se an s in ou sample a e paid much mo e
han he p i a e-sec o wo ke s (Table 3). In e ms o ou chosen
dependen a iable, g oss mon hly ea nings, public se an s
ecei ed €2778 on a e age in 2001, compa ed wi h an equi alen
igu e o €1905 o p i a e sec o wo ke s, a di e en ial o 46 pe
cen . In e ms o he g oss hou ly ea nings a iable we ha e
cons uc ed, he di e en ial is subs an ially la ge , a almos 60 pe
cen . A e age hou ly ea nings o public-sec o wo ke s a e
es ima ed a €18.23 in 2001, compa ed wi h €11.41 o p i a e-
sec o wo ke s8.
The co esponding di e en ials o ea lie yea s we e o a simila
o de o magni ude. Fo he 1994-2001 pe iod, ou da a se
sugges s ha public se an s achie ed an annual a e age inc ease
in mon hly ea nings o 6 pe cen , sligh ly mo e han he 5.8 pe
cen indica ed o p i a e sec o employees. The equi alen a es
o inc ease in a e age hou ly ea nings o he public and p i a e
sec o s a e 6.4 pe cen and 6.6 pe cen espec i ely. These igu es
sugges ha o e he medium o long e m he a io o aw
ea nings as be ween he wo sec o s in I eland does no change
e y much, e en i he e a e app eciable sho - e m luc ua ions in
ha a io. This echoes he indings o o he esea che s such as
Fi zGe ald (2002) and Casey (2004).
8 These igu es imply ha he a e age hou ly ea nings o public sec o employees we e
almos 39% highe han he a e age o all employees in 2001. This is somewha
highe han he es ima e o 34% a i ed a by Casey (2004).
18
Table 3: Fea u es o he da a employed in he analysis o I ish
public-p i a e wage di e en ials, 1994 and 2001
1994 1994 2001 2001
Va iable Public P i a e Public P i a e
Obse a ions # 1,116 2,130 413 1,223
G oss mon hly ea nings € 1,847.52 1,281.19 2,777.55 1,905.25
G oss hou ly ea nings € 11.83 7.30 18.23 11.41
Age Yea s 39.95 33.05 41.73 35.13
Ma ied % 0.718 0.488 0.685 0.488
Male % 0.555 0.581 0.504 0.546
Pa - ime % 0.148 0.116 0.094 0.136
Disabili y % 0.080 0.075 0.056 0.067
Le el 3 Educa ion 0.342 0.177 0.433 0.196
Uppe Le el 2 Educa ion 0.420 0.491 0.387 0.491
Lowe Le el 2 Educa ion 0.237 0.333 0.179 0.313
Uni size 1-4 employees NA NA 0.061 0.121
Uni size 5-19 employees NA NA 0.194 0.262
Uni size 20-49 employees NA NA 0.206 0.218
Uni size 50-99 employees NA NA 0.133 0.117
Uni size 100-499
employees NA NA 0.247 0.196
Uni size 500+ employees NA NA 0.145 0.076
Tenu e <=3 yea s 0.242 0.454 0.288 0.602
Tenu e 4-8 yea s 0.134 0.270 0.153 0.179
Tenu e 9-13 yea s 0.143 0.098 0.114 0.074
Tenu e 14-18 yea s 0.002 0.000 0.087 0.051
Tenu e 19+ yea s 0.479 0.178 0.322 0.080
Con ac ype :
Pe manen NA NA 0.891 0.866
Con ac ype: Fixed NA NA 0.061 0.037
Con ac ype: Casual NA NA 0.027 0.064
Con ac ype: O he NA NA 0.022 0.033
Occup. ype: Manage ial 0.037 0.066 0.068 0.093
Occup. ype: P o essional 0.323 0.083 0.327 0.069
Occup. ype: Technical 0.116 0.088 0.143 0.098
Occup. ype: Cle ical 0.186 0.143 0.186 0.153
Occup. ype: Se ice 0.118 0.174 0.126 0.196
Occup. ype: C a 0.058 0.173 0.031 0.146
Occup. ype: Ope a i e 0.060 0.163 0.051 0.169
Occup. ype: Elemen a y 0.101 0.110 0.068 0.076
Sou ce: ECHP, I eland.
On a e age, public sec o wo ke s in I eland a e olde ; mo e
highly educa ed and ha e spen longe in hei cu en job han
19
hei p i a e sec o coun e pa s. They a e also mo e likely o be
ma ied and mo e likely o be emale. In hese espec s, he I ish
pa e n mi o s ha o o he coun ies whe e simila esea ch has
been ca ied ou (see, o example, Luci o a and Meu s (2004) o
da a on F ance, I aly and he UK, and Melly (2002) o da a on
Ge many).
The e a e se e al o he ele an dimensions along which I ish
public sec o and p i a e sec o wo ke s a e sys ema ically
di e en . Public sec o wo ke s a e mo e likely o be employed on
pe manen o ixed- e m con ac s. They end o wo k in la ge
en i ies: 39 pe cen o public se an s wo k in en i ies (local uni s)
ha employ 100 o mo e people; he co esponding p opo ion o
he p i a e sec o is 27 pe cen .
Impo an ly, he occupa ional p o iles o he wo sec o s a e e y
di e en . Almos 33 pe cen o all public sec o wo ke s a e
classi ied as ‘p o essional’, compa ed wi h less han 7 pe cen o
he p i a e sec o . He e he high p opo ion egis e ed o he
public sec o e lec s in e alia he classi ica ion o eache s. A
he o he end o he occupa ional spec um, 32 pe cen o p i a e
sec o wo ke s all in o ei he he ‘c a ’ o ‘ope a o ’ ca ego ies,
compa ed wi h jus 8 pe cen o he public sec o .
One o he di e ence be ween he wo sec o s is wo h no ing a
his s age. I ela es o he dis ibu ion o ea nings wi hin each o
he sec o s. A p io i, one would expec he dis ibu ion o be mo e
comp essed in he public han he p i a e sec o . This is wha he
in e na ional li e a u e shows. I is also wha ou da a se indica es
o I eland. The coe icien o a ia ion in espec o a e age
mon hly ea nings is consis en ly la ge o he p i a e han he
public sec o o e he pe iod 1994 h ough 2001 (Table 4).
Table 4: Coe icien o a ia ion in public and p i a e g oss-
mon hly ea nings, 1994-2001
1994 1995 1996 1997 1998 1999 2000 2001
Public 0.5283 0.4512 0.4562 0.4769 0.4811 0.5072 0.5590 0.5389
P i a e 0.7126 0.7056 0.6477 0.6462 0.6339 0.6177 0.6164 0.5893
Sou ce: ECHP, I eland.
20
Howe e , in ou sample, he coe icien o a ia ion o he p i a e
sec o declines subs an ially be ween 1994 and 2001, while i
inc eases, albei ma ginally, o he public sec o o e his pe iod.
Taking he wo sec o s oge he , ou da a se indica es ha he
coe icien o a ia ion was conside ably lowe in 2001 han in
1994. Wha all o his sugges s is ha he dispe sion o employee
ea nings declined in he non-ag icul u al economy du ing he
Cel ic Tige pe iod and ha his was mo e han ully accoun ed o
by he educed dispe sion o p i a e-sec o ea nings.
O he esea che s ha e unco e ed simila e idence. Fo example,
Ba e , Fi zGe ald and Nolan (2002) epo a small educ ion in
ea nings dispe sion as measu ed by he a io o he op o he
bo om decile o he pe iod 1994 o 1997, in ma ked con as o
he la ge inc ease in dispe sion hey ound o he pe iod 1987 o
1994. They a ibu e he 1994-1997 pa e n o immig a ion, which
hey a gue was concen a ed amongs skilled wo ke s and hus
augmen ed he supply o skilled wo ke s ela i e o he supply o
unskilled wo ke s in he I ish economy. I is likely ha a simila
explana ion applies o he pe iod om 1997 h ough 2001 as well.
5. The cen al esul s
5.1 OLS eg ession esul s all employees
We i s p esen OLS eg ession esul s o 2001 (Table 5). These
a e ypical o all yea s o ou analysis. Two se s o esul s a e
p esen ed; he i s based on g oss mon hly ea nings as he
dependen a iable, he second on g oss hou ly ea nings. The
coe icien s on all he explana o y a iables ha e he co ec sign
and, wi h ew excep ions, a e s a is ically signi ican . Ea nings a e
posi i ely co ela ed wi h age, educa ion a ainmen , job
expe ience and es ablishmen size, and a y as expec ed ac oss he
occupa ional spec um. Employees who a e male and ma ied, all
o he hings equal, end o ea n mo e han o he s. Those on
pe manen con ac s, all o he hings equal, ea n mo e han hose
on ixed- e m o casual con ac s.
21

Table 5: OLS es ima es o he wage equa ion, 2001
Va iable Mon hly ea nings Hou ly ea nings
Coe icien S anda d
E o * Coe icien S anda d
E o *
Public sec o 0.1298
(
0.0243
)
0.1636
(
0.0234
)
A
g
e 0.0209
(
0.0061
)
0.0210
(
0.0059
)
A
g
e s
q
ua ed -0.0002
(
0.0001
)
-0.0002
(
0.0001
)
Male 0.2383
(
0.0215
)
0.1371
(
0.0199
)
Ma ied 0.0783
(
0.0251
)
0.0813
(
0.0251
)
Pa - ime -0.6518
(
0.0337
)
-0.0823
(
0.0305
)
Disabili
y
-0.0178
(
0.0345
)
-0.0626
(
0.0372
)
Educa ion le el 3 0.3279
(
0.0319
)
0.3219
(
0.0305
)
Educa ion le el 2 0.1220
(
0.0239
)
0.1156
(
0.0217
)
Uni : 5-19 0.0416
(
0.0358
)
0.0678
(
0.0363
)
Uni : 20-49 0.0769
(
0.0364
)
0.1182
(
0.0368
)
Uni : 50-99 0.1301
(
0.0404
)
0.1580
(
0.0406
)
Uni : 100-499 0.1294
(
0.0379
)
0.1463
(
0.0376
)
Un i: 500+ 0.1761
(
0.0435
)
0.1904
(
0.0439
)
Tenu e: 4-8 0.0915
(
0.0247
)
0.0836
(
0.0233
)
Tenu e: 9-13 0.0934
(
0.0363
)
0.0515
(
0.0357
)
Tenu e: 14-18 0.1555
(
0.0374
)
0.1334
(
0.0379
)
Tenu e: 19+ 0.2254
(
0.0347
)
0.1934
(
0.0334
)
Mana
g
emen 0.3854
(
0.0483
)
0.3019
(
0.0453
)
P o essional 0.3772
(
0.0484
)
0.4638
(
0.0455
)
Technical 0.2361
(
0.0441
)
0.2258
(
0.0401
)
Cle ical 0.1204
(
0.0402
)
0.1154
(
0.0359
)
Se ice 0.0153
(
0.0409
)
0.0177
(
0.0349
)
C a 0.2379
(
0.0437
)
0.2175
(
0.0394
)
O
p
e a i e 0.1637
(
0.0409
)
0.1037
(
0.0374
)
Pe manen 0.1597
(
0.0380
)
0.0997
(
0.0326
)
Fixed- e m 0.1419
(
0.0695
)
0.0460
(
0.0646
)
Cons an 6.3307
(
0.1162
)
1.2853
(
0.1118
)
R
2 0.6493 0.5536
* He e oskedas ic obus s anda d e o s. A comple e se o esul s o he yea s
1994 o 2001 is a ailable by eques om he au ho s.
The es ima e o he public-sec o p emium, using g oss mon hly
wages as he dependen a iable, is 13 pe cen and highly
signi ican . In o he wo ds, public sec o wo ke s in I eland in
2001 we e, on a e age, paid 13 pe cen mo e han p i a e sec o
wo ke s, condi ioning on a wide a ay o p oduc i i y- ela ed job
and pe sonal cha ac e is ics. The es ima e o he public sec o
p emium using g oss hou ly ea nings is somewha highe , a o e
22
16 pe cen , and also highly signi ican . These es ima es a e
conside ably highe han hose epo ed by Luci o a and Meu s o
F ance, I aly and he UK o 1998, by Melly o 2000 o
Ge many, and by Disney and Gosling o he UK o 1991-95 and
1990-99. This, despi e he ac ha hese au ho s use speci ica ions
ha a e likely o explain a smalle ac ion o he aw public-
p i a e ea nings di e en ial han ou s.
Table 6 se s ou he es ima es o he p emium ob ained o each o
he yea s 1994 h ough 2001 using di e en speci ica ions o he
wage equa ion. Each speci ica ion uses g oss mon hly ea nings as
he dependen a iable bu a di e en se o explana o y a iables.
This exe cise illumina es wo aspec s o he es ima ed public
sec o p emium: (i) i s sensi i i y o he inclusion o ce ain
explana o y a iables, and (ii) i s beha iou o e ime. We i s
explo e he ques ion o he sensi i i y o he esul s o changes in
speci ica ion.
The speci ica ion labelled ‘Basic’ in he able con ains he
ollowing explana o y a iables: age, age squa ed, gende , ma i al
s a us, educa ion and expe ience, as well as dummy a iables o
pa - ime s a us and disabili y. This is he speci ica ion ha is mos
ypical o he one ound in he in e na ional li e a u e. To his basic
equa ion we add se ially he occupa ion a iable, he con ac - ype
a iable, and he uni size a iable.
Table 6: Es ima e o he public-sec o p emium (all employees)
o a ious speci ica ions o he wage equa ion, 1994-2001
Equa ion
ype 1994 1995 1996 1997 1998 1999 2000 2001
0.1526 0.1693 0.1605 0.1281 0.1535 0.0960 0.1335 0.1398
Basic (0.0180
) (0.0188
) (0.0187
) (0.0198
) (0.0205
) (0.0219
) (0.0236
) (0.0245
)
Basic +
Occupa io
n
0.1407
(0.0174
)
0.1509
(0.0184
)
0.1471
(0.0186
)
0.1215
(0.0194
)
0.1407
(0.0205
)
0.0905
(0.0211
)
0.1200
(0.0231
)
0.1398
(0.0250
)
0.1599 0.1521 0.1300 0.1625 0.1027 0.1398 0.1442
Basic +
Con ac
Type
NA
(0.0187
) (0.0188
) (0.0195
) (0.0204
) (0.0218
) (0.0235
) (0.0245
)
NA NA NA 0.1049 0.1325 0.0769 0.1106 0.1257
Basic +
Uni Size (0.0192
) (0.0199
) (0.0215
) (0.0232
) (0.0240
)
23
Ex ended* 0.1407 0.1460 0.1418 0.0995 0.1336 0.0831 0.1080 0.1298
(0.0174
) (0.0183
) (0.0185
) (0.0183
) (0.0199
) (0.0207
) (0.0221
) (0.0243
)
* The coe icien s o he ‘ex ended’ equa ion a e no compa able ac oss he ull
pe iod – see ex o discussion.
No e: s anda d e o s a e in pa en heses. Comple e eg ession esul s a e
a ailable on eques om he au ho s.
The inclusion o he occupa ion a iable has he e ec o educing
he es ima ed public sec o p emium in each yea excep 2001,
ypically by abou 1-1.5 pe cen poin s. The inclusion o con ac
ype has he e ec o educing he es ima ed p emium o he yea s
1995 and 1996, bu has he opposi e e ec in each subsequen
yea . The con ac - ype a iable could no be included o ei he
sec o o 1994 because he ele an da a we e no collec ed o
ha yea . The uni -size a iable could only be included om 1997,
since he ele an da a we e no collec ed o he public sec o in
ei he 1995 o 1996 and no da a on uni size we e collec ed o
1994. Once included, he uni -size a iable has he e ec o
subs an ially educing he es ima ed p emium, ypically by mo e
han 1.5 pe cen poin s.
Compa ing he coe icien s lis ed in he i s and las ows o Table
6 om 1997 e eals ha he o e all e ec o including all h ee
a iables, as we do in he ‘ex ended’ equa ion, is o educe he
es ima ed p emium o each yea . Fo ins ance, in 2001, ou
es ima e o he p emium would be 14 pe cen a he han 13 pe
cen , had we omi ed all h ee a iables om ou equa ion.
I is impo an o no e ha he coe icien s es ima ed o he
ex ended equa ion a e no compa able ac oss he ull 1994-2001
pe iod. This is because bo h he uni -size and con ac - ype
a iables a e excluded om his speci ica ion o 1994 and he
uni -size a iable is excluded o 1995 and 1996. The coe icien s
es ima ed o he ex ended model a e howe e compa able ac oss
he yea s 1997 h ough 2001. Fo his sub-pe iod, he e is no
disce nible end in he p emium, al hough i does luc ua e
conside ably om yea o yea . O some in e es , in ligh o he
igh ening o labou ma ke condi ions ha occu ed, is he ac
ha he 2001 p emium is bigge han he 1997 p emium, hough
no by a s a is ically signi ican ly ma gin.
24
To examine he beha iou o he public-sec o p emium o e a
longe span we ha e o use one o he speci ica ions ha is
co espondingly ime-consis en . Bo h he basic speci ica ion and
he basic speci ica ion augmen ed by he occupa ional a iable
pe mi us o compa e he p emium o e he ull 1994-2001 pe iod.
In he o me case he e is some sugges ion o a decline in he
p emium, bu he di e ence be ween he es ima es o 1994 and
2001 is no s a is ically signi ican . In he la e case, he p emium
es ima ed o 1994 is i ually iden ical o ha es ima ed o 2001.
Again, gi en he igh ening o labou ma ke condi ions ha
occu ed o e his ime ame, and he widesp ead belie ha his
had lowe ed ea nings in he public sec o ela i e o he p i a e
sec o , his is a no ewo hy esul .
5.2 OLS eg ession esul s: in e ac ion e ec s
A disad an age o he simple dummy- a iable app oach is ha
es ima ed di e ences be ween he wo sec o s a e con ined o he
in e cep e m; in o he wo ds ha e u ns o p oduc i i y- ela ed
pe sonal a ibu es and job cha ac e is ics a e cons ained o be he
same ac oss he wo sec o s. One way o mi iga ing his limi a ion
is o un eg essions whe e he public sec o dummy is allowed
in e ac wi h a ious explana o y a iables. This can be done wi h
any o all o he explana o y a iables. He e, we epo on he
esul s o wo such exe cises whe e he public sec o dummy
a iable is in e ac ed wi h he gende and educa ion a iables
espec i ely. O he wise, he speci ica ion o he equa ions is
exac ly as abo e: in pa icula , hese equa ions a e based on he
speci ica ion ha includes he ull se o explana o y a iables and
uses g oss mon hly ea nings as he dependen a iable ( he
ex ended speci ica ion).
The esul s in espec o gende a e summa ised in Table 7. The
second ow con ains he es ima ed public sec o p emium o
women. We include he es ima ed p emium o all employees in
he i s ow o acili a e he in e p e a ion o he esul s. The hi d
ow shows he es ima ed di e ence be ween he p emium o
women and he p emium o men. The p emium o women is
posi i e and highly s a is ically signi ican h oughou he pe iod
25
Table 10: P obi es ima es o public-sec o s a us, I eland,
2000
Va iable Coe icien S anda d
E o
Age 0.0164 (0.0045)
Male -0.0857 (0.0874)
Ma ied 0.0047 (0.0967)
Pa - ime -0.0104 (0.1296)
Disabili y -0.0192 (0.1643)
Educa ion le el 3 0.3824 (0.1330)
Educa ion le el 2 0.1592 (0.1064)
Tenu e: 4-8 0.4228 (0.1113)
Tenu e: 9-13 0.5787 (0.1350)
Tenu e: 14-18 1.0279 (0.1584)
Tenu e: 19+ 1.1860 (0.1282)
Uni : 5-19 0.0616 (0.1564)
Uni : 20-49 0.2359 (0.1601)
Uni : 50-99 0.2828 (0.1750)
Uni : 100-499 0.3978 (0.1573)
Un i: 500+ 0.6656 (0.1754)
Managemen -0.6240 (0.2009)
P o essional 0.5423 (0.1846)
Technician -0.0793 (0.1811)
Cle k 0.1435 (0.1686)
Se ice -0.1012 (0.1677)
C a -0.9353 (0.2047)
Ope a o -0.6029 (0.1806)
Pe manen -0.1508 (0.2316)
Fixed 0.4844 (0.2786)
Casual 0.0849 (0.2877)
Cons an -1.8852 (0.3381)
Log likelihood = -719.82443
Pseudo R2 = 0.2610
No e: s anda d e o s a e he e oskedas ic obus . Comple e eg ession esul s a e
a ailable om he au ho s upon eques .
32

In he second s ep we ank he p opensi y sco es and di ide he
obse a ions in o 10 equal s a a, wi h he lowes 10% o he
p opensi y sco es in he i s s a a and he second 10% in he 2nd
s a a and so on. Rosenbaum and Rubin (1983) demons a e ha
he dis ibu ion o he obse able cha ac e is ics will be same
wi hin each s a a. The e o e i one s a um is comp ised o all
p i a e-sec o wo ke s hen he e a e no simila public-sec o
wo ke s o compa e hem wi h so hese obse a ions need o be
omi ed om he eg ession sample. As a wo king ule, we
decided o omi a s a um o obse a ions i i con ained ewe han
20 indi iduals om ei he he public o p i a e sec o s. In he
yea s 1997 o 2000, his ule esul ed in he i s h ee s a a (30%
o ou obse a ions) being omi ed om ou eg ession sample; in
1996 we omi ed he i s wo s a a; and in 1994 and 1995 we
excluded he i s s a a. Ou ‘ex ended’ wage speci ica ion was
hen e- un o all yea s on his unca ed da ase and he esul ing
p emium es ima es a e gi en in Table 11.
As is appa en he esul s om he unca ed sample a e e y
simila in all yea s and hey a e no signi ican ly di e en in any
yea . This would imply ha sample selec ion bias, condi ional on
obse able igh -hand-side a iables, is no an issue wi h ou da a.
Table 11: Public-sec o p emium es ima es o he ‘comple e’
sample and he ‘ unca ed’ sample gene a ed by he
p opensi y sco e me hod, I eland, 1994-2000
1994 1995 1996 1997 1998 1999 2000
0.1407 0.1460 0.1418 0.0995 0.1336 0.0831 0.1080
Comple e
sample (0.0170) (0.0187) (0.0187) (0.0187) (0.0196) (0.0209) (0.0227)
0.1489 0.1479 0.1389 0.0999 0.1406 0.0840 0.1078
T unca ed
sample (0.0171) (0.0186) (0.0184) (0.0186) (0.0202) (0.0217) (0.0228)
No e: s anda d e o s a e in pa en heses. Comple e eg ession esul s a e
a ailable om he au ho s upon eques .
6.2 Speci ica ion, measu emen e o and endogenei y bias
33
To he ex en ha wo ke s, due o unobse able alen s o as es,
selec hemsel es in o pa icula sec o s hese ac o s will ha e an
impac on he es ima ed public-sec o p emium. Thus i could be
ha pa o he e ec we’ e cap u ing in he es ima ed p emium
a ises om an unobse ed p oduc i i y o as e a iable. Hence he
OLS es ima e o he p emium would be an o e es ima e o he ue
p emium. I is impo an he e o e o assess he po en ial
impo ance o his ac o .
The panel ea u e o ou da a allows us o use indi idual-wo ke
dummy a iables as a p oxy o possible unobse able ac o s. The
applica ion o he ixed-e ec s es ima o o ou ex ended wage
model implies ha he unobse able ac o s a e unchanged o e
ime and ha he e u ns o hese unobse able ac o s a e simila
o public and p i a e sec o wo ke s.
Gi en hese assump ions, he applica ion o he ixed-e ec s
es ima o will yield an es ima e o he p emium ha will be
de e mined by hose employees ha mo e sec o o e he se en
yea s o ou panel. (A non-ze o coe icien could also be gene a ed
by he p esence o a di e en ial wage g ow h be ween he public
and p i a e sec o s o e he se en-yea pe iod. This possibili y is
es ed below.) This aises a numbe o issues ha impinge on he
assessmen o he esul ing es ima e o he p emium. I seems
easonable ha he po en ial p oblems o bo h measu emen e o
and endogenei y bias will end o be exace ba ed wi h he ixed-
e ec s es ima o . The p esence o bo h o hese biases will end o
bias he ixed-es ima o owa ds ze o which will ope a e o o se
he upwa d bias due o omi ed unobse able a iables ha a lic
he c oss-sec ional eg essions. Bu , as Disney and Gosling (2003)
pe suasi ely a gue, he e is no s ong eason o suppose, as does
F eeman (1984), ha OLS will p o ide an upwa d bound and he
ixed-e ec s es ima o a lowe bound es ima e o he p emium.
In he p esence o bo h measu emen e o and endogenei y bias
he app op ia e es ima o would be ins umen al a iables (IVs).
As always ob aining IVs wi h he equisi e p ope ies is ne e
easy. Fo una ely he ECHPS con ains some quali a i e a iables
ha could se e as po en ial IVs. One in pa icula looks
p omising, namely, wo ke s’ sa is ac ion le els in esponse o a
34
ques ion on job secu i y. Responses classi ied by public and
p i a e-sec o employees o a numbe o yea s da a a e shown in
Table 12. These da a show ha he e is a s ong co ela ion
be ween “job secu i y” sa is ac ion le els and public-sec o s a us.
Table 12: Sa is ac ion le els wi h job secu i y in he public and
p i a e sec o s, I eland, 1994-2000
No e: ECHPS, I eland.
1994 1996
1998 2000
Sa is ac ion
le el % % % %
Public P i a e Public P i a e Public P i a e Public P i a e
1 8.46 10.91 3.5 5.82 3.83 3.76 1.55 2.18
2 4.53 8.62 2.43 6.49 2.19 5.28 1.81 4.05
3 6.2 15.27 4.71 11.73 2.19 9.85 3.1 6.34
4 9.45 17.67 7.45 18.89 9.49 16.41 6.98 17.36
5 20.18 21.92 22.95 30.12 19.34 29.94 20.16 32.95
6 51.18 25.63 58.97 26.96 62.96 34.75 66.41 37.11
Wi h his a iable as an ins umen we es ima ed he wage
equa ion o he balanced panel using 2SLS. In he i s s age we
eg essed he public-sec o s a us dummy on he “job secu i y”
sa is ac ion a iable and all o he o he igh -hand-side a iables
in he ex ended wage equa ion. We hen gene a ed he p edic ed
alues o he public-sec o s a us dummy and used his a iable
ins ead o he o iginal a iable in he es ima ion o he wage
equa ion and he public-sec o p emium.
Table 13 p esen s a ious es ima es o he p emium ha we e
ob ained using he panel da ase . We i s compa e ou OLS
es ima es o he p emium o he balanced panel wi h he a e age
alue o he es ima e ob ained o he se en yea s om he
unbalanced panel. The esul s a e b oadly simila which gi es us
some con idence ha panel a i ion does no appea o i sel o be
associa ed wi h any no iceable biases.
The ixed-e ec s es ima o yields a subs an ially lowe p emium
han he OLS es ima o . On he ace o i , his sugges s ha he
35
OLS es ima es a e subjec o a sizeable upwa d bias due o omi ed
a iables. We es ima ed sepa a e models o men and women
which p oduced e y simila es ima es o he p emium bu he
women’s p emium was no s a is ically signi ican (Annex 8). We
also allowed he p emium es ima e o a y o e ime which
e ealed a p onounced downwa d end o e he pe iod om 1994
o 2000.
Table 13: OLS, ixed-e ec s and ixed-e ec s and 2SLS
es ima es o he public-sec o p emium, I eland, 1994-2000
Es ima o P emium
es ima e
OLS a e age annual (unbalanced panel)* 0.1218
(0.0195)
OLS balanced panel 0.1472
(0.0120)
Fixed-e ec s 0.0474
(0.0211)
Fixed-e ec s and 2SLS 0.1296
(0.0540)
* The simple a e age (1994-2000) o he p emium es ima es gene a ed by he
‘ex ended’ speci ica ion o he wage equa ion in Table 6.
No e: s anda d e o s a e in pa en heses. Comple e eg ession esul s a e
a ailable om he au ho s upon eques .
The combina ion o he ixed-e ec s and he IV es ima o e eals
an es ima e o he p emium ha is qui e close o he OLS es ima e.
This sugges s ha he ixed-e ec s and OLS es ima o s a e bo h
subjec o a subs an ial downwa d bias due o a possible
combina ion o measu emen e o and endogenei y bias. Taking
he ixed-e ec s and ixed-e ec s-2SLS es ima o s oge he
sugges s ha he posi i e bias ha p obably a ises due o he
omission o impo an a iables is mo e han o se by he nega i e
biases ha a e po en ially gene a ed by measu emen e o and
endogenei y. All in all he e o e we eel ha ou esul s p o ide
easonable g ounds o a es ing o he obus ness o he OLS
es ima es.
6. Summa y and conclusions
36
I ish public sec o employees a e on a e age much be e paid han
hei p i a e sec o coun e pa s. The ECHP da ase ha we ha e
used o he analysis p esen ed in his pape indica es ha he
ma gin in he yea 2001 was 46 pe cen when measu ed in e ms
o a e age g oss mon hly ea nings, he measu e we conside o be
he mos app op ia e o hose a ailable.
This di e en ial is e y la ge bu o limi ed ele ance. In
pa icula , i does no necessa ily mean ha pay is highe in he
public sec o on a like- o -like basis. The eason is ha public
se an s a e ypically be e endowed han p i a e sec o
employees wi h he kind o a ibu es ha a ac highe pay: hey
end o be olde , mo e expe ienced and be e educa ed; hey also
end o wo k in mo e highly-skilled jobs and in bigge
es ablishmen s.
The key ques ion add essed in ou pape , he e o e, is whe he
public sec o wo ke s in I eland a e paid mo e han p i a e sec o
employees, when such di e ences in p oduc i i y- ela ed pe sonal
a ibu es and job cha ac e is ics a e con olled o , in o he wo ds
whe he a public-sec o p emium exis s. The answe is clea and
unambiguous. We es ima e ha in 2001, he la es yea o which
we ha e comple ed ou analysis, he p emium enjoyed by public
se an s was abou 13 pe cen , on he basis o g oss mon hly
ea nings.
We ha e analysed whe he and how his p emium a ies wi h
gende , wi h educa ional a ainmen , and ac oss he ea nings
dis ibu ion. In summa y, wha we ha e ound is ha he public
sec o p emium is signi ican ly bigge o hose nea he bo om o
he ea nings dis ibu ion han o hose nea he op, was
signi ican ly bigge o women han men in he mid-1990s bu no
a he end o he 1990s, and does no a y signi ican ly ac oss
di e en le els o educa ional a ainmen .
We ha e also analysed whe he and how he public sec o
p emium changed be ween 1994 and 2001. This was a pe iod o
excep ionally apid ou pu and employmen g ow h, and
co espondingly sha p igh ening o labou ma ke condi ions in
37

he I ish economy. On he basis o in e na ional e idence, i migh
be expec ed ha in such ci cums ances he in ense compe i ion
amongs employe s o a declining pool o a ailable wo ke s
would ha e pushed up ea nings in he p i a e sec o mo e quickly
han in he public sec o , esul ing in a con ac ion o he public
sec o p emium. Ou esea ch unco e s no compelling e idence
ha his was in ac he case: we es ima e he p emium o 2001 o
be no signi ican ly di e en om ha es ima ed o 1994.
Some o ou esul s a e consis en wi h he esea ch indings o
o he coun ies. In pa icula , ou inding ha he public sec o
p emium declines wi h he le el o ea nings is in keeping wi h he
in e na ional pa e n. In con as , ou indings ha emale public
se an s no longe enjoy a signi ican ly bigge p emium han hei
male coun e pa s, and ha he public sec o p emium o hose
ha ha e comple ed hi d-le el educa ion is no signi ican ly
di e en om he p emium enjoyed by ea ly school-lea e s, un
coun e o he in e na ional e idence.
Howe e , he mos ema kable di e ence be ween ou esul s and
hose o o he esea che s ela es o he absolu e size o he
p emium. The public sec o p emium we ha e es ima ed o
I eland is high by in e na ional s anda ds. A 13 pe cen o 2001,
i compa es wi h co esponding es ima es in he ange 4-6 pe cen
o F ance, I aly and he UK, using 1998 da a (ou I ish es ima e
o 1998 is also a ound 13 pe cen ). This con as is all he mo e
no able gi en ha we use a speci ica ion ha would end o
p oduce a lowe es ima e o he p emium han he speci ica ion
used in mos o he published in e na ional li e a u e wi h which
we a e amilia . I is also wo h poin ing ou ha ou es ima e o
I eland p eda es he subs an ial boos o public-sec o wages and
sala ies ha lowed om he so-called ‘benchma king’ p ocess.
Ou pape lea es a numbe o impo an ques ions unanswe ed.
P obably he mos impo an is: why is ou es ima ed public sec o
p emium o I eland so la ge? One possibili y is ha ou es ima es
a e biased upwa ds because o laws in ou me hodology. Fo
example, we may ha e omi ed impo an explana o y a iables, o
he sample we ha e used may be biased – an impo an possibili y
o check o gi en he a i ion in he ECHP panel o e he 1994-
38
2001 pe iod. We ha e ca ied ou a ange o igo ous obus ness
checks o es ablish whe he his migh be he case, and we a e
easonably con iden ha ou es ima es a e no ma e ially a ec ed
by such biases. Tha being he case, he ques ion emains: why, on
a like- o -like basis, a e I ish public-sec o employees paid so
much mo e han hei p i a e-sec o coun e pa s?
One possible explana ion, a a ian o he omi ed a iables
a gumen , has o do wi h he de iciencies in ou measu e o
ea nings. Recall ha he a iable we use alls well sho o being a
comp ehensi e measu e o emune a ion, excluding as i does
bene i s-in-kind, pe o mance- ela ed pay and he alue o pension
en i lemen s. O cou se, i also ails o ake accoun o di e en
a es o PRSI con ibu ion (mos public se an s make lowe PRSI
con ibu ions han hei p i a e sec o coun e pa s) and he alue
o he g ea e secu i y ha ypically a aches o public sec o jobs.
Howe e , he p oblem wi h an explana ion along hese lines is
ha , i all o hese ac o s we e aken in o accoun , i is likely ha
he es ima ed public sec o p emium would ise a he han all,
excep pe haps in he uppe eaches o he ea nings dis ibu ion.
Ano he possible explana ion is ha ce ain public sec o wo ke s
equi e compensa ion o he haza dous, s ess ul and/o
unpleasan na u e o he wo k hey do. This ype o a gumen is
o en ad anced in he discussion o he pay o g oups like p ison
o ice s, Ga dai, eache s and nu ses. Howe e , i is no en i ely
pe suasi e o a leas wo easons. Fi s , haza dous, s ess ul o
unpleasan wo k is no peculia o he public sec o . The e a e also
a g ea many p i a e sec o employees who ha e o endu e such
wo king condi ions. Second, unless he e is eason o belie e ha
he incidence o haza dous, s ess ul and unpleasan wo king
condi ions is g ea e in public se ice employmen in I eland han
elsewhe e, he a gumen does no explain why he public sec o
p emium is so much highe in I eland han in o he ju isdic ions.
The no ion ha a la ge p emium o public sec o employees can
pe sis is an uncom o able one o classically- ained economis s,
since i sugges s ha ma ke s a e no unc ioning p ope ly. I
ma ke s we e unc ioning p ope ly, p i a e sec o wo ke s would
compe e o be e -paying public sec o jobs o he poin whe e he
39
public sec o p emium would disappea . He ein lies ano he
possible explana ion. The ac ha a la ge p emium pe sis s may
be indica i e o ma ke ailu es such as in o ma ion de iciencies,
skill misma ches and ba ie s o en y. The a gumen he e is ha
some combina ion o hese ac o s may e ec i ely p e en p i a e
sec o wo ke s om compe ing o mo e luc a i e public sec o
posi ions, excep ac oss a limi ed ange o ec ui men g ades.
E en his explana ion, despi e i s in ellec ual appeal, is incomple e
howe e . I may shed ligh on why a public sec o p emium
pe sis s bu , in i sel , i does no explain why (i) he p emium in
I eland is so much highe han elsewhe e, o (ii) why he I ish
p emium was main ained a such a high le el h ough a pe iod
cha ac e ised by he ype o labou ma ke condi ions ha migh
ha e been expec ed o cause i o decline. An ob ious a ea o
explo e o answe s o hese ques ions is he wage ba gaining
amewo k ha was in place du ing his pe iod.
A ull explo a ion o his a ea is ou side he scope o his pape .
Tha said, an ob ious hypo hesis sugges s i sel . I is ha I eland’s
social pa ne ship model, and in pa icula he eno mous alue ha
poli icians and policy-make s a ached o i , con e ed on I ish
public sec o ade unions g ea e ba gaining powe han hey
would o he wise ha e had (and g ea e ba gaining powe han
hei in e na ional coun e pa s ypically enjoyed). Acco ding o
his hypo hesis, public sec o ade unions we e hus enabled o
mo e e ec i ely p ese e ba ie s o en y, and mo e success ully
pu sue pay claims ha ma ched he inc eases aking place ac oss
he p i a e sec o du ing he Cel ic Tige pe iod.
40
41
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