Is a democratically elected government entitled to hop into public sector employees’ pay and conditions?

As an admirer of most of the positions Paul Krugman takes, I was caught on the fence when he supported public sector union outrage over what the (I think newly elected) Republican Governor in Wisconsin proposed to do to public sector conditions. From memory the basic political issues were clouded by the fact that the Republican had campaigned in poetry that more or less concealed his prosaic intentions in this score.

But for the life of me I can’t see why the publicly elected government shouldn’t determine the pay and conditions on which it employs people. If they don’t like it, it’s a free country and they can work for someone else. Anyway, now something similar, but it seems to my inexpert eye much milder is happening in NSW. The NSW Fire Brigade Employees’ Union is not happy. It’s taking action over the elected government’s implementation of a policy which doesn’t seem to differ too much from the policy of its predecessor.

It’s first complaint is that the new govt “pegs all future wage rises at 2.5 per cent per annum — well below inflation” How ‘well below inflation’ can you get. A percent or two over five years perhaps – though it could go the other way.

“Secondly, it strips the Industrial Relations Commission (IRC) of its power to award any pay outcome outside of this figure — or indeed to award any outcome in respect of conditions that clashes with government policy.”

And without spending a lot of time I don’t have delving into this, it seems that it’s bringing back productivity bargaining, so that productivity growth becomes a precondition not for wage rises above basic levels, but a background expectation of maintaining real wage maintenance – rather like the ‘efficiency dividend’ is worked into agency funding arrangements.

Beats me why someone who’s managed to land a job in the sector sometime in the past can maintain things to their own advantage (at others’ cost) and against the will of the elected government of the day.

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20 Responses to Is a democratically elected government entitled to hop into public sector employees’ pay and conditions?

  1. Don Arthur says:

    Nicholas – I would have thought the real problem is how much the public sector needs to pay in order to attract and keep people who are able to do the job. If you set wages below this level then you have to cut either the quality or quantity of services.

    What do you think about arguments that the public sector suffers from Baumol’s ‘cost disease’?

    Are you quoting from Jim Casey’s piece in New Matilda?

  2. Nicholas Gruen says:

    Hi Don, yes I was quoting from it – and linked to it.

    I also agree that the PS capturing the right people to work for it is the other side of the coin and I should have mentioned it. The one argument in favour of union action that I can see is that the public sector – ie us electors – are too myopic to pay for decent wages/conditions and therefore the quality of the service falls.

    Indeed I think this happens with to an extent with teachers and nurses. But it is self-correcting in the sense that if things get bad enough more money goes in because the public demand it. They’ve done that recently with nurses, and do it regularly with police. Still these guys have their unions – which also do a lot of harm as well as possibly some good in maintaining wages. But somehow they still end up in a fairly bad way. I expect most public servants do less important work than a lot of nurses, teachers and police, though with some of the ones in policy development, it’s important that they’re good.

    But somehow the idea of simply grabbing hold of community assets and literally holding them to ransom until you get what you want just isn’t something that makes sense to me. Perhaps that’s an argument for ‘the umpire’ that Casey is so upset about having been neutered.

    Yes, I expect the PS suffers from “Baumol’s ‘cost disease’” though so do taxi drivers and basically the whole of the (unskilled) service sector – and if you can’t get your work done overseas – then the productivity growth around you feeds into your own job. It’s hard to see how taxi drivers are more productive here than they are in Bangladesh but they make a lot more here – and it’s not because anyone’s taking action on their behalf.

  3. David Walker says:

    Don, it is possible that the new NSW government has indeed looked at the issue of what is needed to attract and keep people – and has decided that the answer is “less than we’re paying them now”.

    It is certainly conceivable that this is the right answer for firefighters. In certain states, at certain times, firefighting has been considered a dream job for a certain type of bloke – paying well, and with hours short enough and with enough free daylight time to let you run a business on the side. I do not know whether this is currently the case in NSW.

    But more to Nick’s point, a rule that governments can improve their employees’ pay and conditions but never make them worse is a recipe for ensuring public servants eventually comes to be seen as having a special deal compared to the rest of society. Then you get a backlash, with more and more people deciding that government is terminally stupid and inefficient.

    The public deserves to have the public sector run properly. People who believe the public sector has an important role to play in society should be the strongest defenders of this principle.

  4. Don Arthur says:

    Nicholas — Silly me. I missed the link.

    It seems to be easier for governments to contract out than deal with their own employees.

    But if the cost disease problem is real then even with contracting out and other strategies to limit wages to the market rate you you’ll reach a point where you can’t limit labour cost increases to inflation and maintain the same quality and quantity of services.

  5. Nicholas Gruen says:

    As I see it the real danger is not having the quality of services slip, if by services you mean call centres, and other delivered services. There’s a fair kind of political calculus protecting those standards, so the political pendulum can swing with fairly short notice. The real risk is that people with real talent for policy making get driven out of the service. But I’m not sure how big that risk is. Certainly whilst we’ve been subjecting the public service to a tad more market forces, those at the top have seen to it that they’ve prospered using the private sector’s pace setting to arrange wage rises for themselves. Comparative wage justice rulz.

    In the meantime, the culture we do have is pretty poxy with the service stuffed with people who headed there for the job security – ie their safety from being sacked for the miserable reason that there was someone else who could do their job better.

  6. Pedro says:

    Can you even say that rising wages will lead to improved services? I should have thought that possible effects of rising PS wages is long term pressure on job numbers because taxes cannot necessarily rise sufficiently. The connection between higher wages and better employees seems intuitive, but the quality of PS employees is affected by much more than just wages.

    Nursing does look like a good example of where wage levels often make it difficult to hold or reengage good staff. Ditto with teaching. I don’t know so many people working in policy areas, but with those I do know it seems that the potential for money-wasting and time-serving is just as high as other sections.

    “In the meantime, the culture we do have is pretty poxy with the service stuffed with people who headed there for the job security – ie their safety from being sacked for the miserable reason that there was someone else who could do their job better.”

    Change that and the benefits of greater wage setting flexibility come right into focus.

  7. Jacques Chester says:

    I think the main dynamic in public service quality is a feedback loop whereby the bad employees drive out the good ones. Bad employees are basically unsackable, so they just get shuffled around from unit to unit. At each unit they can inspire good people to quit and go to the private sector. Net effect: the mean worker gets steadily worse, making the problem more intense.

  8. paul walter says:

    Heh, heh, heh!

  9. Victor Trumper says:

    I love the irony of Jacques comment

  10. Dave says:


    I believe that where the government is an effective monopsony, public sector employees deserve some protection. But who is going to protect them? Not the government: they are the problem, not the solution.

    I thought the raison d’etre of the IRC was to resolve this conflict.

  11. Patrick says:

    Irony? As in using words with exactly the opposite actual meaning to their literal meaning?

    Are you focusing on the word ‘mean’? That would be a pun, if so. Or are you focusing on ‘quality’?

  12. aidan says:

    Walker was proposing stripping most government workers of much of their collective bargaining rights. Your basic union-busting tactics. I don’t think that is ok. John Howard does.

  13. Pedro says:

    this article by Joel Klien (did I see the link here) is interesting on this general point

  14. Victor Trumper says:


    Jacques talks about being unable to sack public servants. The article is about reducing their pay and conditions!
    what is the worst case of reducing conditions?

  15. Marks says:

    I think that Kennett, and probably Greiner, debunked the myth that public servants cannot be sacked. Similarly, defined benefit super went out the door in the 80s along with a whole bundle of other things that used to be reasons for choosing a ps career. Been there, done that, left it over ten years ago, and would not go back because of low pay for the type of work I do.

    The problem with blanket limits is that they cover such a wide range of occupations where some areas probably dont even rate a rise at all, while others will just start to suffer from the old syndrome of ‘you pretend to pay us, and we will pretend to function’ because those areas will not be able to attract people able to do the work. Point is, a ‘one size fits all’ approach may hve worked when there were hordes of applicants for PS jobs and every position could be filled. It does not work where there are shortages in certain areas and the PS is just another job with few real market place advantages.

  16. paul walter says:

    Yes Victor, the idea is to make them miserable for as long as possible before you sack them. Here’s the real fun. Same with most employer employee relationships, in the age of Serf Choices.
    Feed back loops, yes?
    “Everyone rises or sinks to their own level of incompetence”, which is why bosses and the masses of workers are where and what they are. For the rest, Marx and co will explain further..

  17. wizofaus says:

    “It’s hard to see how taxi drivers are more productive here than they are in Bangladesh”

    Really?? The condition of the roads, the cars, the communications equipment, etc. etc.? Or even just the simple fact that you’re creating a lot more value taking, e.g. a CEO from a major metropolitan airport to an important business meeting than, well, realistically any sort of journey a Bangladeshi taxi driver is likely to make.

    There are definitely examples of professions where it’s hard to increase productivity much (Classical musicians is a good one) but taxi drivers don’t seem to fit the bill.

  18. Patrick says:

    What country do you live in Paul?

  19. Pedro says:

    My first mother in law worked for the Australia Post and Telecom Promotions Appeal Board. The name says it all and the concept is, of course, mind-boggling.

  20. paul walter says:

    Patrick, you and I have spent much of our lives on opposite lines of the pickets and yet are probably interchangeable, I suspect. Rubs chin ruefully.
    We both hyperbole a lot.
    No, Australia is not a Gulag, but it’s not an earthly paradise for many even here and we both know the real world of Asia, Africa and South America is far worse. I rate it as on a mimimum operating efficiency for a society aiming to produce what we call civilisation, as opposed to slavery.
    The thing is, given the wit of humanity and the availability of resources, why is Australia the exception rather than the norm as to what constitutes an operative state in a (dys) functional world
    The problem is in “mentality”; I just don’t understand this attitude from people like O’Feral, who prefer adversariality to inclusion and cooperation.
    Why go out of the way to alienate people who are just working stiffs like the rest of us, for the benefit of a few merchant bankers shareholders and fund managers on the North shore with coffers already overflowing? So economically unproductive, when you think of it.
    Without a set of open laws, some sort of constructive mentality and outlook and some sort of civilised mission statement as well as checks and balances-consciousness- we just go back to the warlord level in East Africa, some thing back to the feudal level of masters and slaves and no in built protections for the masses.

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