Why Cutting Public Sector Pay Is Always a Bad Idea

At the moment the government is trying to negotiate a deal to best cut public sector wages. However, any such deal will only make the recession worse without reducing the deficit. Here is a guest blog I wrote on the topic.

Irish Student Left Online

– Robert Nielsen discusses the ongoing dispute over the Croke Park II proposals, and why cutting wages is always a bad idea.

At the moment there is a great deal of controversy over the Croke Park Deal. In essence the government is trying to cut the wages of public sector workers while the public sector unions are opposing this. Regardless of the politics of the agreement, cutting wages is bad economics. It depresses the economy, worsens the recession and doesn’t even achieve its objective of reducing the deficit. The union membership was absolutely right to reject the Croke Park Deal and the government must completely reconsider its plan of action, because the current one isn’t working.

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3 thoughts on “Why Cutting Public Sector Pay Is Always a Bad Idea”

  1. Robert,

    We may have to agree to disagree on this subject. Not because I disagree with your argument. Overall, your argument is well thought out.

    However, you leave some things out of your argument.

    First, according to your argument, we should just giver everyone on the government payroll a ten fold pay raise. “Wait! That is too much,” you say? Ok, then how about a 90% pay cut? “Whoa! You went to far the other way.”

    OK, all your overall argument did was support that there is a balance between too much wage and not enough wage for government employees. I would think that much is common sense.

    And there are two more things not well addressed. The true cost and the true purpose of government.

    Since I believe a smaller government is better, the true purpose of government is not as an employer. The true purpose of government is defense and governance. All else is waste.

    The other problem is cost. By merely glossing over the true cost of employing government workers, you ignore the overall drain upon the economy. Many bright and very productive people are absorbed out of the private market into the government market. And like your example for communism, the brain drain cripples the society, and the economic engine, as a whole.

    And I would link back to your blog post, but you already know I cannot do that.

    Good blog. Nice read. And we will probably just have to agree to disagree on the size of government.


    1. I see you don’t try to claim I don’t use enough sources here 🙂

      Actually I don’t say anything about increasing wages, rather that they shouldn’t be cut.

      The size of the government is a good question and debate to have, but its not the one I’m making here. You see, whatever about the long run, now is not a good time to reduce the size of the government as this will only depress the economy. This is more a case of practicality than ideology.

      I would disagree that the public sector is just waste and I think they perform a lot of good in health education, communication, utilites etc.

      Other blogs have linked to my page without problem, why would you be unable to?

      I guess agreeing to disagree is the easiest option.

  2. You always provide well argued pieces…however the fundamental flaw is that govt is not a productive institution. Govt is a wealth consuming entity and not about creation of wealth. Producing something creates value and wealth…not spending.

    In times when any business or household is short on cash, they tend to curtail expenses to maintain viability, not borrow their way to prosperity. What make govt immune to that? The effect it would have on the economy?

    This is problem with ‘stimulus spending’ (it’s almost an oxymoron)….giving money to create productivity is putting the horse before the cart.


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