License article

Are public service job losses really the price of a pay rise?

Show comments

Good news for public servants: the government has set aside enough money to hire an extra 7325 full-time staff over the next three years.

The bad news? It will require a pay freeze.

This week, the Abbott government warned that a union request for a 4 per cent a year wage rise could lead to more than 23,000 public sector job losses.

The Community and Public Sector Union dismissed the claim as ludicrous; national secretary Nadine Flood said it was "obvious the figures have been cooked up to provide cover for a government intent on making more wide-scale cuts to jobs and services".

And the truth? It's impossible to assess the government's modelling without seeing it in full, but there are a few obvious flaws.

First, the prediction of 23,460 job losses is based on the assumption they are all junior (i.e. cheaper) staff. We already know that most public servants leaving the bureaucracy are in fact mid-level executives.


Second, when we apply the Finance Department's forecasting methodology - used in the data interactive above - we come up with a rather different picture.

The latest budget data, released in December, shows the government intends to cut its wages bill by $197 million in 2014-15, then increase it the following year by a relatively tiny amount, before finally allowing a "normal" increase (closer to inflation) in 2016-17.

Explained another way, this means the government already plans to shed almost 15,000 full-time-equivalent jobs over the three years from July 1, 2014, when most public servants are scheduled to begin their next wage agreement.

That estimated loss (14,942 jobs) is based on an average pay rise of 3 per cent a year, in line with current government policy.

Assuming the wages kitty is neither raided nor topped up, a 4 per cent a year raise would "cost" an extra 6861 average full-time jobs, on top of the 14,942.

Conversely, a 2.5 per cent a year raise - in sync with inflation forecasts - would "save" 3531 jobs.

The sticking points in wage negotiations regularly end up being non-pecuniary conditions.

Nonetheless, this is a whole-of-government scenario - including military personnel, public servants and staff in other agencies - subject to dozens of variables: it's impossible to predict accurately what will happen.

For example, the government may manage to limit annual pay rises to 3 per cent. But the current hiring freeze may mean staff stay in their jobs longer and be more likely to go up a notch within their pay grade - on top of whatever wage increase is negotiated.

Alternatively, the government's push to rid itself of middle managers may relieve pressure on wage spending, allowing the bureaucracy to cut fewer jobs than initially forecast.

Yet, ultimately, we miss some crucial points if we focus too much on the numbers.

The massive, bureaucracy-wide enterprising bargaining round that will soon kick off is about more than just salaries. Indeed, the sticking points in negotiations regularly end up being non-pecuniary conditions.

It's also a tad presumptuous of Employment Minister Eriz Abetz to assume that a pay rise of X dollars equals a loss of Y jobs.

Has he given up on using the upcoming negotiations to boost productivity? Does Abetz really believe there are no better, cheaper ways for government staff to work? No ways of saving public money other than by sacking public servants?

If so, he may be mostly right. After all, the former Labor government has already scraped the obvious inefficiencies out of the bureaucracy and locked those savings into future budgets - so neither Abetz nor public servants can claim those cuts as extra productivity gains during these negotiations.

But surely, with a little invention, analysis and genuine discussion over the coming months, the government and its staff can find some cleverer ways to work, and perhaps save a few jobs in the process.