Yesterday I read the news that employment in the public sector was far better paid then employment in the private sector. The article in the Chronic did not mention whether the comparison was inclusive or exclusive of other benefits, e.g. pay related gratuity and pension. It must be assumed that it did not but that it was a direct comparison of earnings only.
One should not begrudge that any person earns more than another and I do not but this sectorial differential is substantial, even if no account is taken of pension benefits. The disparity becomes huge when one does brings pension benefits into account.
These public employee salaries are funded, in the main, through direct taxation paid by the private sector and indirect taxation generated also by the private sector. The private sector depends on remaining competitive in order to sustain both profit and levels of employment. It is the private sector which, in turn, generates the wealth and tax revenues that sustain the ability of the government to employ public servants.
It is inconceivable that the private sector could sustain a major increase in cost such as would be required to achieve parity with the public sector. If there were to be pressure to do so, Gibraltar would be faced with a substantial and serious political and economic problem that would require brave and innovative solutions to allow its economy continues to prosper and provide to the government the revenue required to pay its public servants and those who have retired fron public service receiving pensions.
A diminution of economic activity and employment in the private sector caused by salary inflation could force a reduction in employment in the public sector and reduce or negative the affordability by government of public sector pensions. The private sector and employment by it is already threatened by the regressive revenue raising measures announced in the last budget.
If this scenario were to develop, public servants should understand the threat this would pose to their present very secure existence and retirement. This is a phenomenon that public servants in other countries have faced and are facing today, not least in Spain where a 5% salary reduction has been imposed on all public servants and in many EEC countries in which substantial pension reforms are in process.
There is no doubt that productivity in employment is also an important contributor to any economy. There is no mention, in the Chronic article, of any comparison between the productivity of the public and private sector. Undoubtedly there are highly productive persons in both sectors. Anecdotally, there is a widespread belief that, generally, those employed in the public have an easier ride throughout their careers than employees in the private sector. Whether such a belief is true or not is irrelevant. The existence of the belief is sufficient for that factor to increase pressure on salary levels in the private sector.
The private sector cannot operate without an efficient and productive public sector. There needs to be a clear understanding of that. Public employees are "civil servants". This means that they serve and are paid for by the public at large. Brave political decisions and action will be required to redress the disparity that now exists. Those decisions cannot be such as would disrupt Gibraltar's competitive edge and its ability to survive as an independent economic unit. Further any reforms should ensure that the public sector provides an efficient and competitive service to the whole of Gibraltar in order that the private sector can operate efficiently to produce the economic wealth required to sustain the public sector.
The need to achieve a new relationship between public and private sectors becomes even more urgent in the face of the bad world economic situation. No one should proceed on the basis that Gibraltar will avoid every effect of this. Historically economic downturns in other countries have arrived in Gibraltar with a time lag of up to 18 to 24 months. There are small signs in the private sector that this is now starting.