It has been mentioned before that Northern Ireland’s public sector pays 43% more on average than the private sector. Whatever about “like for like” employment, the simple fact is that this makes the public sector more tempting for our best educated people than the private sector.
In sensible economies, this is the other way around. In return for the job security and pensions that come with the public sector, pay is slightly lower; some of the best people are tempted by this, but others are tempted by the higher pay potentially available in the private sector, despite the fact that it is a more risky career route (and typically does not come with generous pensions and such like attached).
Although some quibble about the precise figure, few dispute the general point that there is an imbalance here. What is interesting, however, is that there are two general responses: first, that it’s a legacy issue and although we should do something about it, “now is not the time”; or second, that we should cut public sector pay (and pensions and everything else) to equalize it with the private sector. There is a third response which rarely rears its head – we should generally raise private sector pay.
This third option seems counter-intuitive at best and ridiculous at worst. How does business help itself by knocking money off its bottom line (by raising it a few lines into its wage bill)? Yet, herein lies the real problem with the economic debate in NI – even asking such a question is a very “public sector” way of looking at the world – yes, in a world of set budgets, raising wages reduces the remainder. However, in a world of wealth creation, raising wages may in fact also raise the overall budget by attracting better people to work for the organization and thus enable it to create wealth faster.
It was notable that the automatic response to Bombardier’s warning that it could not expand in NI without lower corporation tax was that perhaps it should pay lower wages or even reduce staff. Could it be, however, that absolutely the contrary is the case? If companies paid higher wages – yes, much higher wages – they may be able more easily to attract the best NI has to offer (and indeed attract the best to NI) and thus make their investment in NI still more profitable.
Indeed, one of the prime reasons the Corporation Tax Reduction argument has been lost is precisely that businesses refused to say what they would do with the extra money. If they had pledged to re-allocate it to staff wages and training, the political and indeed economic case would have been a lot easier to make. The implicit suggestion that, rather, they would maintain wages at their current ludicrously low levels and hand the rest of share holders (often not based in NI) was the reason the idea never gained any real traction – “all-party support” is not the same as “all-party absolute prioritisation”.
Politicians do need to do their part to better understand the economy and better assist local and investing businesses. However, the blunt truth is that businesses need to do more too – and they themselves should not fall prey to the all-pervasive “public sector culture” which is the precise reason economic re-balancing is so necessary.