New Taxpayers’ Union report shows the public sector is living far beyond its means

The new 2023 Public Sector Wage Gap Report from the New Zealand Taxpayers’ Union investigating workforce differences between the public and private sector demonstrates that, while average public sector wages have stagnated recently, the growth in the number of government employees continues to burden the taxpayer, particularly across ministries and Core Crown departments, where back-office appointments have been prioritized over the front line.

With analysis on wage differentials, staffing levels, sick leave habits and annual leave entitlements, this report showcases the true extent of the benefits currently enjoyed by public sector employees. Using a combination of data assorted from a variety of sources including Statistics New Zealand, the Public Service Commission, and from individual departments, the report concludes the following key findings:

Key findings of the report:

• As a percentage of private sector average hourly earnings, the current wage premium for the public sector is 21.3% as of June 2023.
• The wage premium has narrowed significantly over the last decade, fuelled largely by a combination of strong wage growth in the private sector and pay freeze initiatives across high-wage personnel in the public sector.
• Over the last five years, the increase in the total headcount at the public sector has significantly outpaced the headcount increase for the private sector – 15.3% to 9.8%. Over the same period, the combined headcount across ministries and Core Crown departments in the Public Service grew by even more at 27.0%
• Recent appointments at almost all ministries and core departments have shown to prioritize back-office over the front-line. This has caused some departments now to carry a disproportionate share of managerial staff on their payroll. The Ministry of Defence, for example, now has nearly as many managers as it does other staff.
• In 2022, public sector employees took an average of 1.1 days more in sick leave than workers in the private sector – 6.5 to 5.4. If public sector workers took the same amount of sick leave as those in the private sector, taxpayers would have saved over $173 million in 2022. 

Key recommendations:

• With immense pressure expected to mount over next few years regarding public sector wages, it is paramount that the Government commits to restraining wage growth, ensuring that it does not outpace comparable growth in the private sector.
• Current staffing growth across both the wider public sector and the Public Service specifically is far too high. At a bare minimum, public sector staffing growth should not exceed population growth, but should be cut back in areas where possible.
• The provision of frontline services is important, especially in the context of New Zealand’s cost-of-living crisis. This means cutting back on managerial appointments and ensuring that the employment and maintaining of health, education, and social workers should be prioritized.
• The Government should investigate why sick leave entitlement is being taken at a much higher rate in the public sector than in the private sector. If this analysis determines that public sector departments are providing extra sick leave unnecessarily, then arrangements should be made to ensure that this benefit reduced.

Commenting on the release of the 2023 Public Sector Wage Gap Report, Taxpayers’ Union Head of Campaigns, Callum Purves said:

“While the gap in average earnings between the public and private sector may have reduced significantly over the past several years, the Government is still spending more and more on its personnel thanks to the sheer growth in staff numbers across departments.

“Not only do more and more managers each now oversee fewer and fewer staff, but the number of frontline employees in social, health and education work hasn’t increased nearly as quickly. What should have been necessary investment into essential services over the last few years has instead been rampant bureaucracy through the back-office.

“Even the finance minister knows the current state of the public sector’s workforce is untenable. His last-ditch attempt to cut Public Service expenditure right before PREFU only highlighted the little faith he had in his own fiscal management.

“If the Government really wants to reduce the enormous deficit facing the country, it must look to optimize its payroll and hold people to account. It is clear that the current staffing arrangement is shockingly unsustainable."