Have public service wages kept up with inflation?

Pay talks on a new public sector agreement between senior Government officials and union leaders are well under way.

The workers' representatives argue wages have fallen behind due to a significant increase in inflation over recent years.

For its part, the Government contends pay rises have kept pace with the cost of living from 2024 until the existing agreement expired in June of this year.

The Central Statistics Office (CSO) collates figures on public sector weekly earnings before tax in the civil service, Defence Forces, An Garda Síochána, and workers in education and healthcare.

Looking back over the past decade, it is clear that all categories have kept pace with inflation, but a very different picture emerges over a shorter number of years.

Comparing CSO figures for the second quarter (April to June) of 2016 with the same period in 2026, civil service wages rose by 43%, Defence Forces earnings are up 50%, gardaí 40%, workers in education 39% and in healthcare 43%.

The next question is what happened to inflation over the same period?

Between June 2016 and June 2026, inflation was up by 27.4%, according to the CSO. This period covers two significant rises in the cost of living: the outbreak of the war in Ukraine and the start of the conflict in Iran, but also covers a period of relatively subdued inflation.

By the second quarter of this year, average civil service earnings were €62,950, Defence Forces were €62,533, gardaí €95,353, education workers €65,540 and healthcare workers €65,151, according to the CSO.

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The average wages of gardaí stand out as higher than the rest, but these include overtime, which increases earnings for members.

It is instructive to also examine the number of "paid hours worked", which show gardaí are boosting their pay by working longer hours.

The average paid hours in the civil service are 36 hours, 35.3 in the Defence Forces, gardaí 43.2 hours, education 24.7 hours and health 33.6 hours.

In many cases the earnings figures include allowances, promotions, overtime and annual increments paid to public sector workers as they move up a wage scale.

If they have reached the ceiling of a salary scale, they then often rely entirely on the public sector wage agreement for a salary boost and some workers see their wages rise faster than others.

The example of the ten-year period above is just one timeframe. Looking at different periods, a variety of results are yielded.

Unions and the Government were doing just that in the lead-up to the public sector pay talks.

The unions argue that wages fell behind prices by 5% as a result of the peak inflationary period between 2021 and 2025, and have dropped further in 2026.

The Coalition has taken a different timeframe and says the most recent public sector pay agreement, which ran from January 2024 until June 2026, delivered cumulative pay improvements of 9.6% which was ahead of inflation.

Looking at the union's argument from January 2021 until June 2026, the rise in the cost of living was 27.2% according to the CSO - that was particularly driven by a burst in inflation of 8.2% in 2022 following the outbreak of the war in Ukraine.

From the beginning of 2021 until the second quarter of 2026, wages rose by 23% for civil servants, 28% for Defence Forces, 36% for gardaí, 21% for education workers and 25% for healthcare workers.

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Over that timeframe, certainly most categories of public sector workers fell behind.

Using the Government's timeframe of the most recent pay agreement from January 2024 until June 2026, total gross earnings in the civil service rose 9%, for Defence Forces it was 14%, it was 17% for gardaí, education 12% and health 7%.

Over the same period, inflation rose 8%.

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The most recent public sector pay agreement expired in June of this year and since then there has been a considerable rise in the cost of living driven by higher energy prices.

A new deal is likely to be backdated to June of this year.

But an important aspect of the pay talks will be to forecast inflation for the rest of 2026 and the next two years.

While inflation is currently running at 4.1%, the Central Bank's latest forecast says it will be 3.4% for the full year of 2026 before falling to 3.1% next year and 2% in 2028.

On previous occasions, the deals have run for two or two and a half years.

It's possible the next agreement will run until the end of 2028.

Another issue is that forecasts for inflation can be wrong. Few foresaw the war in Iran and its impact on energy markets, and the Trump administration's actions are far from predictable.

The price of brent crude has remained above $100 a barrel almost continuously since early September.

Food prices, obviously a crucial expense for those struggling with the cost of living, are expected to rise following a surge in fertiliser costs earlier this year.

For union leaders and senior Government officials, second-guessing the accuracy of inflation forecasts in a highly unpredictable world will be perhaps the most important issue they must grapple with over the coming days.

It's easier said than done.