Research by stockbrokers Davy has shown that average pay in the public sector in Ireland now stand at €47,000 per year, compared with an average of €33,900 in the private sector, before any allowance for differences in pension entitlements and job security.

The Davy study conflicts with a Central Statistics Office report earlier this month, which stated that public sector workers are paid slightly less than private sector equivalents, and that lower paid workers are better off in the public sector, while those at the top earn more in the private sector. On average, said the CSO, public sector workers earned 9% more than equivalent private sector employees in 2011, but this narrowed to a 5% differential by 2014, the latest year for which the data is available.

However, Davy’s report claims that its report is informed by what is actually paid to workers, as pay scales in the public sector are often unrepresentative of actual earnings due to a myriad of allowances, reliefs and other payments.

Davy says that only half of the 40% pay gap it identifies can be attributed to differences in education, experience, qualifications and other factors. It also found a wide variation of wage rates in the public sector, with gardai and semi-states at the higher end with average wages of €64,700 and €53,300 respectively. The Defence Forces had the lowest average pay at €42,000, still above the average private sector pay of €33,900.

The pay gap data does not take in to account pension differences. Davy estimates that a private sector worker would need to save €590,000 to buy an annuity that matched public sector career average salary pensions of €23,000. At current annuity rates, a pension that provided €22,000 of annual income (above the contributory pension) would cost €1 million.

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Davy chief economist Conall MacCoille (pictured) commented: “As the Public Sector Pay Commission gears up for negotiations on a new public sector pay agreement, we believe that has to be informed by comparison of the full suite of employment benefits across the public and private sectors.

“We don’t believe it is possible to bridge the pay gap in the short term but we believe that the starting point should be to not make matters worse by awarding increases exceeding those in the private sector or that fail to take account of external factors. Our core view is that overall public sector pay and benefits are unsustainably higher than the private sector and upcoming pay talks should not exacerbate that.”

Based on its findings, the Davy report recommends that:

• Any new public sector pay agreement to succeed the Lansdowne Road Agreement should only commit to pay rises in line with the private sector
• Any increases should be conditional on the ongoing performance of the economy and tax revenues so as to guard against the risks posed by Brexit, corporate tax reform and other uncertainties
• The value of pensions should be included in any comparison of public and private sector pay

A report by ESRI last December claimed there is little clarity on the difference between public and private sector pay. The state-funded research body said it was necessary to "generate a reliable estimate of the public-private sector pay premium" in order for pay talks to be effective.