IGEES Irish Government Economic and Evaluation Service “Public Service Employment & Expenditure 1980 – 2018” 8th Annual NERI Labour Market Conference 17 September 2020 Evan Walker
Disclaimer: 1. This work was carried out in DPER. 2. I currently work for IGEES in Department of Health. 3. The views presented in this paper do not represent the official views of the Departments or Ministers. Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 2 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
Outline 1. Post PSSA Paybill Growth 2. Empirical Analysis 3. Policy Implications Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 3 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
Rationale / Objective “Improved modelling of medium-term expenditure levels to facilitate expenditure planning, structural reform and delivery, in line with fiscal rules ” DPER Statement of Strategy 2016-2019 1.Forecast what expenditure pressures are likely to manifest over the medium term Economic cycle Demographic change Service Delivery - Existing Level Body Level One - Enhanced Level Body Level Two Body Level Three 2.Decide what expenditure pressures should be included in medium term ceilings Body Level Four Body Level Five 4 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
Paybill Procyclicality 20% 15% 10% % Change Y/Y 5% 0% -5% Body Level One Body Level Two -10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (f) Body Level Three Body Level Four % Numbers % Rates CPI YoY YoY Growth Body Level Five 5 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
Current Expenditure and Paybill Growth 2015 2016 2017 2018 2019 Gross Voted Current €50.9 €51.8 €54 €57.1 €59.3 % Change 1.8% 4.3% 5.6% 3.9% Gross Voted Pay €15.1 €15.6 €16.5 €17.7 €18.7 Body Level One Body Level Two % Change 3% 6% 7.3% 5.6% Body Level Three Body Level Four Body Level Five 6 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
Numbers Pressure since PSSA Numbers Growth since 2016 Numbers Forecast Defence Employment Affairs & Social Protection Community and Rural Affairs Taoiseach's Budget Numbers Outturn Excess Culture, Heritage and the Gaeltacht Estimate Growth Communications, Climate Action & Environment Business, Enterprise & Innovation Rural & Community Development 305,395 309,751 4,356 8,163 2016 Transport Agriculture Children & Youth Affairs 314,740 320,758 6,018 11,007 2017 Finance Foreign Affairs 325,873 328,921 6,129 8,162 Public Expenditure & Reform 2018 Body Level One Justice Housing, Planning & Local Government Body Level Two Education Body Level Three Health Public Service Numbers Body Level Four -5,000 - 5,000 10,000 15,000 20,000 25,000 30,000 Body Level Five 7 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
Rates Pressure since PSSA 1. Defence Forces PSPC Defence €10,000,000 €10,000,000 + €150m €3,500,000 2. Health Care Support Staff by 2020 HCA €8,500,000 €12,000,000 €19,304,999 3. Enhanced Nursing Practice €381m Nurse €27,716,279 €47,021,278 PSSA in 2020 €31,364,243 4. New Entrants NE €46,620,048 €77,984,291 €0 €20,000,000 €40,000,000 €60,000,000 €80,000,000 €100,000,000 2019 2020 Cumulative 8 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
Determinants of Paybill Fiscal – Macroeconomy • (World Bank, 2014), (IGEES, 2018), (Park, 2015), Macroeconomic & Political (Freeman,1987) Political – Political Economy, Elections • (IMF, 2016), (Lane, 2003) (McCeartaigh, 2017). Numbers Rates Numbers – Demographics Pressures • (IGEES, 2016), (Department of Finance, 2018) Wages – Cost of Living Pressures • (Blanchard, 1986), (Winters, 2009), (Bover, 1989) (Mayock, 2016) Public Service Paybill 9 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
Driver of Public Service Numbers Demographics Pressures Increased Expenditure Pressure Health, Social Protection. Pressure on Productivity, Output, Revenue. Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 10 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
Increased Supply of Data €6,000,000 €5,000,000 €4,000,000 €3,000,000 €2,000,000 €1,000,000 Body Level One €0 Body Level Two Body Level Three Body Level Four Paybill Interpolated PB Q Actual PB A Actual Body Level Five 11 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
Data and Methodology • Creation of LR time series • Transformation of Data • Time series analysis Exponential Smoothing Autoregressive Integrated Moving Average Modelling Time Series Regression Analysis ARDL and Cointegration Body Level One • Forecast Averaging Method Body Level Two (Clemen, 1989) Body Level Three (Makridakis, 2000) Body Level Four • (Timmerman,2006) Body Level Five 12 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
Econometric Results Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 13 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
Econometric Results Economic Cycle Demographics 3.5 2.5 3 2 2.5 1.5 2 1.5 1 1 0.5 0.5 0 0 Body Level One -0.5 -0.5 Body Level Two Body Level Three -1 -1 Body Level Four Election CPI GNP Recession Revenue Live -1.5 (Dummy Register Cohort > 65 years old Cohort 15 - 65 years old Cohort < 14 years old Moratorium (Dummy Variable) Body Level Five Variable) 14 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
Policy Relevance • The scale and composition of demographic change will put upwards pressure on public service employment, regardless of the economic cycle. How do we prepare for this in an E fficient, E ffective and • E quitable way, with due regard for scarce resources? Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 15 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform
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