IGEES Irish Government Economic and Evaluation Service Public - - PowerPoint PPT Presentation

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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.

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“Public Service Employment & Expenditure 1980 – 2018” 8th Annual NERI Labour Market Conference

17 September 2020 Evan Walker

IGEES

Irish Government Economic and Evaluation Service

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2 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform

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

  • fficial views of the Departments or Ministers.
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3 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform

Outline

  • 1. Post PSSA Paybill Growth
  • 2. Empirical Analysis
  • 3. Policy Implications
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4 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
  • Enhanced Level

2.Decide what expenditure pressures should be included in medium term ceilings

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5 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform

Paybill Procyclicality

  • 10%
  • 5%

0% 5% 10% 15% 20% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (f) % Change Y/Y

% Numbers % Rates CPI YoY YoY Growth

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6 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 % Change 3% 6% 7.3% 5.6%

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7 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform

Numbers Pressure since PSSA

Numbers Growth since 2016 Numbers Forecast

  • 5,000
  • 5,000

10,000 15,000 20,000 25,000 30,000 Public Service Numbers Health Education Housing, Planning & Local Government Justice Public Expenditure & Reform Foreign Affairs Finance Children & Youth Affairs Agriculture Transport Rural & Community Development Business, Enterprise & Innovation Communications, Climate Action & Environment Culture, Heritage and the Gaeltacht Taoiseach's Community and Rural Affairs Employment Affairs & Social Protection Defence

Budget Estimate Outturn Excess Numbers Growth

2016

305,395 309,751 4,356 8,163

2017

314,740 320,758 6,018 11,007

2018

325,873 328,921 6,129 8,162

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8 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform

Rates Pressure since PSSA

1. Defence Forces PSPC 2. Health Care Support Staff 3. Enhanced Nursing Practice 4. New Entrants

€77,984,291 €47,021,278 €12,000,000 €10,000,000

€46,620,048 €27,716,279 €8,500,000 €10,000,000

€31,364,243 €19,304,999 €3,500,000

€0 €20,000,000 €40,000,000 €60,000,000 €80,000,000 €100,000,000 NE Nurse HCA Defence

2019 2020 Cumulative

+ €150m by 2020 €381m PSSA in 2020

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9 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform

Determinants of Paybill

Macroeconomic & Political Rates Public Service Paybill Numbers

Fiscal – Macroeconomy

  • (World Bank, 2014), (IGEES, 2018), (Park, 2015),

(Freeman,1987)

Political – Political Economy, Elections

  • (IMF, 2016), (Lane, 2003) (McCeartaigh, 2017).

Numbers – Demographics Pressures

  • (IGEES, 2016), (Department of Finance, 2018)

Wages – Cost of Living Pressures

  • (Blanchard, 1986), (Winters, 2009), (Bover, 1989) (Mayock, 2016)
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10 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.

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11 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform

Increased Supply of Data

€0 €1,000,000 €2,000,000 €3,000,000 €4,000,000 €5,000,000 €6,000,000

Paybill Interpolated PB Q Actual PB A Actual

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12 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
  • Forecast Averaging Method
  • (Clemen, 1989)
  • (Makridakis, 2000)
  • (Timmerman,2006)
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13 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform

Econometric Results

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14 An Roinn Caiteachais Phoiblí agus Athchóirithe | Department of Public Expenditure and Reform

Econometric Results

Economic Cycle Demographics

  • 1
  • 0.5

0.5 1 1.5 2 2.5 Election CPI GNP Recession (Dummy Variable) Revenue Live Register

  • 1.5
  • 1
  • 0.5

0.5 1 1.5 2 2.5 3 3.5

Cohort > 65 years old Cohort 15 - 65 years old Cohort < 14 years old Moratorium (Dummy Variable)

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15 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 Efficient, Effective and

Equitable way, with due regard for scarce resources?