Data released this week confirmed what many Canberrans know too well: public servants' pay barely budged last year. The median salary of Australian Public Service staff rose just 0.1 per cent in 2014, an unprecedentedly low outcome.
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Many government employees' salaries have remained unchanged for almost two years. Most APS enterprise agreements expired in July 2014 but no agency appears even close to finalising a new deal. The reason is simple: the Abbott government's bargaining policy makes it extremely difficult for agencies to offer staff anything other than negligible pay rises (usually funded by "cashing out" non-monetary benefits), and staff, understandably, are not best pleased by these proposals.
The resulting dispute has become bogged in a slanging match between the government and staff unions about the need for "fiscal restraint" versus "fairness". The government, usually through Employment Minister Eric Abetz, says it would happily pay higher wages if it had a surplus but, because it doesn't, public servants must shoulder some of the "deficit repair" burden. Unions says public servants are working harder than ever and a pay cut (in real terms, at least) is inherently unjust.
What's missing from this debate is a genuine discussion of the most important question: what is the value of public servants' labour, and are taxpayers under or overpaying for it?
Some in government believe the present pay freeze is an important and overdue correction, coupled with efforts to thin the bureaucracy's middle-management ranks. It is generally accepted that pay growth and "classification creep" – employing staff at gradually higher levels despite no corresponding increase in job output or complexity – was excessive during the Howard government's latter terms. Canberra businesses argue likewise, saying the bureaucracy's rapid wage growth distorted the ACT labour market and left employers paying considerably more for skills than was paid in other capitals. One business group said recently that ACT employers needed to pay about $10,000 a year extra for relatively unskilled staff than would employers elsewhere in Australia.
Nonetheless, these views are mostly anecdotal. In contrast, the last independent, comparative study of APS remuneration, published four years ago, suggested mid and senior-level public servants were paid relatively poorly.
Whatever the truth, it makes little sense for a government to associate the size of staff pay rises with the size of its deficit or surplus; if it does, it will inevitably end up paying more or less than the labour market demands. It is past time for a detailed, independent analysis of public service pay, and for the government to use such a study to guide its workforce planning and its enterprise agreements.
Unfortunately, no government is likely to be able do this until it deals with that other great problem with APS pay: decentralisation. This policy began under prime minister Paul Keating and was furthered by John Howard. It made little sense at the time but has become a disastrous mess since. As a result, job classifications in different agencies now have little in common, and agencies pay at times vastly different salaries for staff who perform similar work. It is neither fair nor efficient; it can also have an inflationary effect on wages.
Until a government tackles this problem, the federal public sector's $20 billion annual wage bill is likely to continue to be guided by little more than rhetoric and whim.
