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Monti Takes His Knife to Italy’s Public Sector

Mario Monti has got round to taking a look at Italy’s often maligned public sector, and, much to the disgust of Italy’s unions who are threatening a general strike, may reduce the numbers public sector employees as part of his attempt to prevent Italy’s already substantial public debt from growing even further.

The proposal is to reduce the numbers of public sector managers by 20% and other staff by 10%, as well as reducing the number of consultants by 20%.

Well, I’ve been digging around and taking a look at various EU reports and an OECD study, plus a good few statistics, some of which were recently quoted in the Every Italian Forks Out €2,849 for Public-sector Workers article which appeared in English on the website of Italian newspaper Il Corriere della Sera.

According to the Corriere della Sera article of May 15, 2012, Italy’s public sector costs each Italian €2,849.  This figure is marginally higher than the cost per capita of Germany’s public sector at €2,830.  In the UK, the cost is €3,118, in Holland it’s €3,557, and France’s public sector costs it’s population €4,001 per head, per year.  However, and as is often the case, the numbers do not tell the full story.

Italy’s annual account for 2008, 2009 and 201o as published by the Italy’s Court of Auditors, states that in 2010 there were just over 3.42 million public sector employees – a figure which does not include the 19,500 or so employees on fixed term or training contracts.  In the United Kingdom in the fourth quarter of 201o, there were just over 6.2 million public sector workers.  Both countries have similar populations of around 60 million people.

The initial reaction is probably to think that the UK has too many public sector employees, although in general standards of service are perceived as being higher than in Italy.  But if one takes a look at the cost of each public sector employee, it becomes clear that something in Italy is not right.

Public Sector Cost Per Head in Italy

Some quick calculations reveal that the UK’s annual spend on the nation’s 6.2 million public sector employees is 187 billion Euros which equates to each public sector employee costing around €30,000.  In Italy in 2010, the annual wage bill amounted to 166 billion Euros, so each public sector worker cost an average of over €48,000 a head.

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The figures suggest that some of Italy’s public sector employees are paid too much: there is a the 60% difference in cost per public sector employee head between Italy and the UK.  Generally, Italians believe that work in the public sector is not well paid, and the nations teachers would agree this is the case when they compare their pay to their counterparts in other European nations.  The root of difference in cost per head seems to be there are too many very highly paid managers in Italy, and there is evidence to suggest this is the case.

Record Public Sector Salaries

The salaries of Italy’s INPS pensions body head (€1.2 million) and the national police chief (€650,000) are known to be much higher than those of their counterparts in some other nations.  Other public sector employees also receive generous salaries.  The boss of Italy’s revenue service earns €620,000 a year, and the head of Italy’s treasury is paid €788,000 a year, and has other paying positions too.

Just to put these salaries in proportion, the president of the United States of American earns a paltry €318,000 a year.

It should be pointed out that Italy’s public sector, as a result of the efforts of the Berlusconi’s government’s ex-Minister Renato Brunetta’s effort’s in this area, is on an efficiency drive.

According to Eurostat figures, Italy spent 11.1% of its GDP in 2010 on the nation’s public sector wages bill whereas the UK spends 11.4% of GDP on public sector pay.  Italy’s employs fewer people than the UK and the figures suggest some are being paid far too much.  In terms of efficiency, very few Italians would agree that their nation’s public sector provides anything like the level of service of Germany’s, for example, which, costs slightly less per capita than Italy’s.

The cuts being proposed by the Monti government will save Italy’s taxpayers money, but at what expense in terms of services?  Still, a fall in the level of services is to be expected after decades of political mismanagement and Italy does need to cut its spending.  The services situation is likely to worsen before it recovers, unless the efficiency drive really does bear fruit.  Cutting down on Italy’s reams of red tape would help too.

More cuts are in the pipeline too.

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