Showing posts with label public sector cuts. Show all posts
Showing posts with label public sector cuts. Show all posts

Saturday, September 15, 2012

15/9/2012: A handy IMF map for Budget 2013?


The elephant in the room (at 9% of GDP or 11% of GNP, with pensions - at 10.6% GDP or 13 of GNP, that's right more than one euro in eight) - courtesy of the IMF:


Thursday, June 7, 2012

7/6/2012: QNHS Q1 2012 - Public Sector

In the previous post I covered some data for the public sector employment based on the main tables in QNHS dataset. QNHS also, handily, provides a specific public sector employment series that are supplied as an appendix and cover data for employment including and excluding census workers. This post deals with these.

Two charts below show the breakdown of public sector only employment by categories:



Interestingly, data suggests that reduction of public sector employment in health and education has been offset by increases in private sector employment in these sub-sectors (see previous post for more detailed analysis of total employment in these sub-sectors). This might be due to staff substitution and early retirees coming back via private sector.

Table below summarizes the data:


Saturday, September 17, 2011

17/09/2011: QNHS 2Q 2011 - public sector v private sector trends

This is the second post on the data from QNHS for 2Q 2011.

Table below summarises data from QNHS results, showing changes for specific sectors of the economy as well as core figures for overall employment, labor force and unemployment.
Using the data from core QNHS we can compute decomposition of employment pool into three broadly defined subsectors, as shown below. The core trends here are the following:
Ratio of private sector employees to those employed in public sector now stands at ca 2.76 private sector workers per 1 public sector employee. Sacred yet? That ratio rose from 2.73 in (an improvement, in fact) qoq between 1Q 2011 and 2Q 2011, but is down from 2.78 in 2Q 2010 and 3.00 in 2Q 2009. In other words, there are fewer private sector employees now per each public sector employee than in either 2010 or 2009 or indeed in 2008 and so on.

The same is true across the specific sectors. There are more people in employment in education per private sector worker now than 2007-2010, there are more people employed in public administration per private sector worker now than in 2007-2010, there are more people employed in healthcare per person employed in private sector today than in any moment since 1Q 2004. This, after the allegedly savage cuts in numbers in public sector employment.

QNHS also now reports EHECS-based public sector employment estimates. Table 1.1 below (reproduced from QNHS release) shows the estimates of public sector employment broken down by the different high level areas within the public sector. I've added the red line below showing proportional allocation of employment - the number of private sector workers per each public sector worker. This only slightly differs from the same metric I derived above based solely on QNHS. Again, there are, broadly speaking, 2.82 persons working in private sector per each 1 person in public sector. A year ago, there were 2.86, 2 years ago, there were 2.85... savage cuts folks? Not exactly. Looks more like continued steady burden on private sector from supporting public sector employment.
That's a tough thing to swallow, folks. Per CSO: "The number of employees in the public sector showed no change over the year to Q2 2011. However, the employment figures for this quarter include 5,300 additional temporary Census field staff who were employed during the periods covering Q1 and Q2 2011. When these staff are excluded there was a fall of 1.3% in employment over the year to Q2 2011." Give it a thought, folks - a fall of 1.3% when unemployment rose 3.93% and underemployment went up 20.89% and employment fell 2.1% and private sector employment declined 2.4%.

"The number of employees in the public sector has continued to fall over the last three years with a total decrease of 24,600 up to Q2 2011 when excluding census field staff." Drama unfolds? Let's check that table above. Since 4Q 2008 through 2Q 2011:
  • Private sector employment is down 12.9%
  • Civil service employment is down 7.5%
  • Semi-states employment is down 8.5%
  • Total public sector ex-semi-states employment is down 5.5%
  • Total public sector employment is down 5.9%
Draw your own conclusions as to whether the Croke Park is delivering or not.

Sunday, June 21, 2009

Economics 22/06/2009: Cutting public waste

Weekend papers had some rumors concerning the An Bord Snip Nua's forthcoming report with figures in the range of €4bn being quoted as the overall level of 'savage cuts' to be recommended. I have no specific information as to the exact figure that the body will recommend at this time, but I have expressed serious concerns previously that the An Board's cuts will be short of what is needed to restore balance to public spending.

Current official DfoF estimates put the need for 2010-2011 'cuts' in expenditure at €3bn in current expenditure and €1.75bn in capital expenditure. This, alongside with €2.5bn and €2.1bn in new tax revenue, is expected (by DofF) to deliver the Supplementary (April) Budget 2009 deficit targets. Clearly, these targets alone fully subsume the An Bord Snip's rumored levels of cuts. But wait, DofF's Fremowrk Programme published in April 2009 shows (Table 7) additional cost 'adjustments' of €4bn in 2012 and €3bn in 2013. Thus, the total for 2010-2013 in cost adjustments envisioned by DofF is €11.75bn.

In other words, should An Bord Snip deliver on €4bn in cuts, it will be €7.75bn behind the DofF targets for current spending cuts. If the DofF were to be serious in delivering on its own deficit targets, this means that additional tax measures between 2009 and 2013 will have to add up to the above number, or roughly, €1,800 per person in Ireland. Mad?

Now, let us do the magic for our An Bord Snip folks and look at the levels (not sources of cuts needed). Per Revised Estimates for Public Services 2009, we have:
Following these cuts for 2010, I will freeze spending at 2010 level for 2011 and 2012, generating the following 2010-2013 balance sheet:
Yes, cuts proposed above are savage indeed, but the benefit is that we will be running 7% deficit in 2010, 4% deficit in 2011 and 3% deficit in 2012, while generating €4.1bn, €3.6bn and €3.4bn in stimulus money at the same time. Translated into per-capita terms, we will have €2,636 per every man, woman and child in this country for tax cut between 2010 and 2012.

I guess, An Bord Snip can't be expected to worry about such minor numbers...


And while on the topic of Sunday papers: the report in the Sindo stated that the cornerstone of Brian Lenihan / Alan Ahearne's economic growth forecasts for 2011-2012 is their expectation that 150,000 people will leave Ireland in search of work elsewhere. If the Government and its adviser do indeed have such a 'policy' response in mind, I can chracterise it as:
  1. Morally depraved and a sign of their abandoning any democratic and ethical responsibility. If Ireland is a mature democracy, Brian Cowen, as a Prime Minister of this country should immediately ask for both Lenihan's and Ahearne's explanation of the Sindo claim and, if it is confirmed, both should be forced to resign their posts.
  2. Economically illiterate. Selection bias will ensure that the 150,000 who will leave will be above average in skills and superior in aptitude. With their departure, Ireland will lose a large number of young, more productive workers who also hold the greatest promise for this economy in the future. Equally damaging will be the fact that once the better skilled and younger workers leave this country, their success abroad will ensure that they will not be easily enticed to return to the Cowen-Lenihan-Coughlan & Ahearne Paradise in the future.
One part of the report in the Sindo - the part that cites senior DofF officials stating that Lenihan's strategy for dealing with this crisis is to tax his way out of fiscal insolvency - is true. I can confirm that my own 'birdie' from the Upper Merrion Street has chirped last Friday that senior Department officials 'are very concerned' that Brian Lenihan and Co are 'only interested in grabbing more tax revenue... with no regard for the effects their new taxes will have in the future' post-crisis. In particular, several tax areas currently under pressure have been mentioned as being the targets of such 'revenue grab': income tax, carbon tax, property tax, and employee PAYE.

Saturday, April 4, 2009

Public Sector's Missing 'Pains'

Charts below are self-illustrative:
  • Public Sector Employment is up,
  • Public Sector Wages are up,
  • Public sector wages dispersion is extremely low across all categories, so Unions' claim that in some sectors wages are too low simply does not add up (per above and below)
  • Cost Savings promised in July 2008, September 2008, October 2008, November 2008, December 2008, January 2009, February 2009, March 2009 and that will be promised comes next week's Mini-Budget are nowhere to be seen.
A lesson to be learned by Brian^2+Mary: you can announce vacuous plans but we'll catch you.

A lesson to be learned by voters: they (Brian, Brian & Mary) don't give a damn if we know or not.

Wednesday, March 18, 2009

A wish list: asking for the right policies

For those of you who missed it, here is my take on Mr Cowen's White House visit - an unedited version of the article in yesterday's Irish Daily Mail.


There is always much ado about the Taoiseach’s visit to the White House on St Patrick’s Day. And yet, for all the opportunities such occasions present, it is only in rare instances of major crises, either North or South of the Border, that any meaningful discussions take place. Well, it is the Annual Shamrock Presentation Ceremony today and we are in a crisis of monumental proportions. So, within the context of the long-running tradition of crisis requests, what exactly should Brian Cowen be asking of Barack Obama today?

First and foremost, a flight of fancy - he should ask for the US to allow Ireland to adopt the dollar as our currency. What a prospect that would be. Set at roughly $0.80-0.85 to 1 euro at conversion, the dollarization would lead to an instantaneous and adequate repricing of our labour, business and capital costs to ensure that these are reflective of our true productivity and real inefficiencies. It would also allow us to fall into the US interest rates regime which is much closer to our real economy’s need than the Germany-focused ECB rates can ever be.

As a side benefit, dollarization would bring our real per capita income in line with that of the median US State – a slightly optimistic valuation, given our lower standard of living. But a good starting point for bringing a sense of reality to our political elites who still believe that we are all fat kittens of the Celtic Tiger when it comes to taxing our incomes.

Too drastic? Indeed, I hear the protests already from the Department of Foreign Affairs. When I asked a senior Irish academic as to what his top priority for the White House visit would be, his reply was: 'Number one? A statehood for Ireland or something similar to the Puerto Rico model!' Now, that might be going a bit too far.

Humour aside, we can restore Irish competitiveness through an alternative, much longer and more painful process of deflating our real wages and cutting excessive fat in the public sector spending. Instead of dollarization-induced devaluation, we can opt for a, say, 30% cut in public sector wages, plus a 20% cut in public sector employment numbers, leading to a ca 40% cut in the Government’s current expenditure. Add to this some 20% cut in the private sector average earnings (by now we are almost half way there in real terms), and we will be on the road to a recovery.

Mr Cowen should also ask the US to fully open bilateral labour and capital markets with Ireland.

In practical terms, the former would imply Brian Cowen announcing today that any US citizen or legal resident can work and reside in Ireland without any restrictions. Following this unilateral opening,the Taoiseach should ask President Obama to reciprocate by opening up the US labour market to Irish citizens and residents.

As a side-benefit, we can also open our education systems to students from both countries, guaranteeing that American students coming to undertake their degree studies in Ireland will face EU resident tuition rates, while Irish students traveling to study in the US will have access to the same merit-based study grants and tuition as US students.

While a less dramatic broadening of the work visa regime is likely to be acceptable for Mr Obama, Ireland should stake a more ambitious goal of achieving a fully mobile labour flow between the two countries.

Extending this mobility to education will make it possible for Ireland to become a real player in international knowledge economics and give us a significant competitive advantage over our EU counterparts. In effect, the UK is already enjoying relatively free mobility of its students when it comes to top US universities, with the likes of University of Chicago even opening a campus there. For Ireland to be able to supply a better educated labour force than that of our closest neighbour, and to compete globally for best students, Brian Cowen needs to either bring about strong incentives for US universities to set up their European campuses here, or to gain access for our best students to US education system, or both.

In capital markets, we should aim to maximally align our regulatory standards while preserving Irish competitive advantage in the area of taxation. Of course, President Obama might have a question or two about our corporate tax regime, especially when it comes to the repatriation of FDI-generated profits. Brian Cowen should stand firm on the issue, asking the White House to exempt Ireland from any forthcoming legislation aiming to restrict US multinationals’ ability to book overseas profits.

During his election campaign, Mr Obama made some sweeping statements about the role played by the ‘temporary’ tax exemptions for corporate profits earned outside the US in fueling the drive for ‘outsourcing of American jobs’ to other countries, including Ireland. This is misguided from the US economy’s perspective, and extremely dangerous from the point of view of Ireland. Mr Cowen can do the US and Ireland a favour by reminding President Obama that higher value activities in the US operations (e.g R&D, managerial innovation, marketing and sales) depend crucially on companies ability to access restricted markets of Europe including via Irish operations.

In exchange, as a goodwill gesture and, coincidentally, to the benefit of our own traded services sector, Mr Cowen should promise President Obama to veto all and any EU proposals for unified international financial regulation. This is something that the US Administration opposes because of the threat such bureaucratization poses to the largest services sector in the world. Incidentally, this is also something Ireland should oppose if we were to retain and expand our competitive position in the sector.

Closely linked to this should be a request to extend US accountancy and governance rules to Irish plcs. Think of the benefits that Securities and Exchange Commission (SEC) oversight and law enforcement would have brought to the Anglo Irish Bank shenanigans or to the financial acrobatics at the Irish Nationwide and the IL&P? In the wake of the latest annual results publication, only SEC had the guts to question AIB’s bad debt provisions.

Think of the savings to the Exchequer and the gains to regulatory efficiency that this country would have achieved were our regulators acting under the US conditions. Of course, Mr Cowen might suggest that Ireland and the US also jointly do something about restricting careless lending practices by the banks in the future and limit the excessive risk-adjusted gearing in the countries’ financial systems.

Mr Cowen might also ask President Obama to extend his latest US Federal Government pay containment measures to Ireland. In fact, Mr Cowen can benchmark our public sector wages to those in the US – starting with a ca 60% cut of his own and Cabinet’s salaries. Our senior regulators and civil servants can also enjoy US-comparable earnings at a ca40-50% discount to their current wages.

Lastly, as a personal favour, I would like Mr Cowen to ask the US President to place a limit on the number of Irish public and local authorities officials flying to the US for St Patrick's Day celebrations and to impose a strict limit on FAS’ spending during its visits to NASA, Disneyland and Sea World in the future. As vital as these locations might be to generating future employment for numerous Irish astronauts, aquarium minders and fantasy castles managers, we are, after all, in a crisis. Time to slim down and get fitter. Presenting shamrocks and drawing pints will have to wait.