A pay rise for public servants would do us all some good

There is more than one point of view on public servant salaries – and the choices the next state government makes after the election will have widespread consequences.

With a state election only days away, a UNSW Business School Professor of Economics has suggested an increased wage cap for public sector workers would have wide-reaching positive gains for NSW.

Professor Richard Holden’s comments come days after NSW Premier Gladys Berejiklian criticised Labor’s plans to scrap the 2.5% cap on wages growth for the state’s 390,000+ public servants.

Prof Holden explained, increasing the current 2.5% cap on wages (for public servants) would provide NSW with long term advantages.

“It would benefit people more broadly … I think the right question is, ‘Are wages that are paid to public servants in NSW sufficient to attract and retain the best people?’ And I think that’s what the focus should be on, and not purely on the numbers,” Prof Holden said.

As constituents turn up to polling booths to cast their vote on Saturday, pressure is mounting on the Premier and the NSW government over the cost of living in the state.

Opposing Labor’s plans for a rise in the wage growth cap, Ms Berejiklian said: “We want to hire 5000 more nurses, 4600 more teachers, 1500 more police. That's our policy. What Labor wants to do is give a pay rise to middle managers in the public service.”

However, the UNSW Professor of Economics said it was imperative to understand both sides of the bureaucratic stoush.

I think both sides of politics in NSW have got plans to expand the number of nurses, so we’d need to see more details of the policy before we assess that properly,” he said.

According to Holden, advanced world economies in the modern era require a low (3–4%) unemployment rate compared to the past, to get wages growing strongly – meaning investment in physical and social infrastructure.

Last month the Reserve Bank governor, Philip Lowe, said wage growth was sluggish because of some underlying fundamentals.

Professor Holden commented: “If these underlying factors were doing better, then wage growth would be higher … it would be better for the economy generally because of the increase spending power and the ability to service the incredibly high level of household debt experienced by many Australians.”

"One needs to draw the distinction between what the root cause of things are, rather than treating the symptom," he said.