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

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.

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

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.

Employment Minister Eric Abetz will oversee this year's public service wage negotiations.

Employment Minister Eric Abetz will oversee this year's public service wage negotiations. Photo: Peter Mathew

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.

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.

44 comments so far

  • But we forget the probability of this government simply backing away. Abbott already rescinded his commitment to 12,000 job cuts. The CPSU proved it can scare the prime minister (who has always been PR focused). I expect their demand for a 12% wage increase to be more or less accepted (sure, it might drop to 10%) with the Coalition, tongues held, boosting the APS "kity" to avoid a cull. Deloitte has already suggested the Commission of Audit won't recommend any cuts and that seems very likely to me.

    Commenter
    Jim Joe
    Date and time
    February 12, 2014, 12:10AM
    • Agreed. There is no more talk f 12 to 14 thousand jobs going. Merging and streaming IT and HR systems in new depts will contribute to efficiencies.

      And then we will be back in election mode and money will start flowing...

      Commenter
      Intrigued of Palmerston
      Date and time
      February 12, 2014, 7:48AM
    • The CPSU can't scare anyone. They are the weakest and most ineffectual union there has ever been. It is well known around Canberra.

      Commenter
      CPSU power?
      Date and time
      February 12, 2014, 5:29PM
  • The CPSU couldn't scare a mouse. There will be cuts as dept/agencies merge. This will cut IT, HR, FInance, Property and an array of middle managers as areas are merged.

    Commenter
    stoney
    Date and time
    February 12, 2014, 7:14AM
    • Oh please, please, please let it be Human Resources that get cut.
      What do those people do anyway? Apart from waste money, resources and office space and harass non conforming workers.
      It is not like they actually produce anything, is it? :-)

      Commenter
      GenX
      Date and time
      February 12, 2014, 9:02AM
  • Great article and Abetz needs to do his home-work better and stop his scare-mongering tactics and inflame an already dire situation for those in gainful employment in the PS and others aspiring to get in. I am guessing that the Abbott govt is likely to maintain their position and hope people will forget by the next GE in 3 years time and vote them back in. It is also likely that if re-elected, Abbott will do a Howard and increase the PS by 20-30k before voters see thru him and kick him out unceremoniously as they did his mentor.

    Commenter
    Akari
    Location
    Canberra
    Date and time
    February 12, 2014, 7:43AM
    • An extremely bitter pill to swallow reading this when one considers Abbott and all the other politicans received around 40% payrise a couple of years ago (remember he now earns more than the US President) and then got another 6% or so some 6 months later. Do not remember them sacking any politicians to cover the cost then. How dare he stand there and say public servants are greedy asking for a measly 4%.
      Perhaps politicians greed should be highlighted in future articles.

      Commenter
      TuffGuy
      Location
      Canberra
      Date and time
      February 12, 2014, 7:48AM
      • Couldn't agree more! Next time the pollies are up for a payrise, everyone should lobby the Tribunal to say that they will need to get rid of x amount of politicians in order for them to have it.

        Commenter
        J
        Location
        Canberra
        Date and time
        February 12, 2014, 3:46PM
    • Allow me to pass on to the Public Service the same level of concern shown by the public of Australia towards the people that are about to lose their jobs in the car industry.
      Goodbye. Retrain. Stop crying. Good riddance. Suffer. Go away. Disappear.
      I personally have no issue with public servants. That is merely an example of the sympathy you will get from the Australian public at large. :-)

      Commenter
      GenX
      Date and time
      February 12, 2014, 8:08AM
      • Yes that's right..............until you need something from us like customs and immigration at airports or the pension for your grandma or any of the other services which will be cut. Without the public service, Australia doesn't work. Simple as that.

        Commenter
        farnarkler
        Location
        Canberra
        Date and time
        February 12, 2014, 9:14AM

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