Public Sector Pay Rises Lead to More Expensive Services (Feature)

By , 04 Feb 2019, 12:50 PM Politics
Public Sector Pay Rises Lead to More Expensive Services (Feature) TaxRebate.org.uk CC-by-2.0

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STA, 4 February 2019 - Most public sector employees will benefit from a rise as they get their January payslips this month. However, the pay deal struck at the end of last year will also result in costlier public services.

Citing higher labour costs, some of the retirement homes and kindergartens have already hiked up the prices of their services, while higher wages may yet translate into higher supplementary health insurance premiums and in-home support services. However, not all hikes can be blamed on higher wages.

Prices of services at retirement homes are as a rule adjusted once a year, that is on 1 March. An additional adjustment is possible if labour costs have gone up by more than 1.5% since the last adjustment.

The Labour Ministry says that labour costs resulting from annexes to collective bargaining agreements increased by about 4% from 1 January on. These costs "represent about 50% in the price structure, which at 4% pay rise translates into 2% higher price of services".

According to ministry data, 60% of service providers opted for adjustment of prices of their services as of 1 January, following the ministry's recommendation that the average price increase should not exceed 2%.

However, they will be able to introduce additional hikes on 3 March due to changes in other elements of the price such as the costs of material, services, investment maintenance, amortisation and financing.

The ministry expects that the providers who did not adjust their prices at the beginning of the year, will do so now by an average of between 2% and 3%. Those who did would be able to increase prices by a further 1% on 1 March.

Nursery school fees are also going up. City councils in municipalities such as Ptuj, Velenje and Kranj, have already given the go ahead for price hikes of between 3% and 10%.

Ptuj Mayor Nuška Gajšek has linked the rises directly to the public sector pay deal, noting that labour costs represent more than 80% of the fee at nursery schools.

She says that municipalities are underfunded even without the burden of the latest pay rise, so part of the increase in costs would have to be covered by parents.

"If we wanted to subsidise the increase in prices, it would cost the municipality more than 400,000 euro a year, on top of the 3.4 million we already allocate for the purpose."

Velenje will allocate an additional EUR 500,000 for the increase in the cost of nursery schools. The increase in fees affecting the parents will depend on their income and the age of their child.

Parents in the median wage bracket will be paying EUR 14.92 more a month for first age group children, EUR 11.67 more for children in combined age groups classes and EUR 11.08 more for oldest children. The lowest income parents will pay EUR 3-4 more and top income parents up to EUR 32.84 more.

Several other municipalities are considering raising nursery school fees, while Maribor and Ljubljana will wait for calculations after the kindergartens have paid out January pay, before taking decisions.

The Education Ministry says prices of nursery school fees go up at different rates from one municipality to another and that they are not affected by higher wages alone.

The ministry is thus considering amending the pricing rules to "align individual elements of the price and thus prices", however it will also need to consider the position of local communities and nursery schools.

Similarly, one of the trade unionists who agreed the pay rises, Branimir Štrukelj of the KSJS confederation, says that some of the providers have used the pay rise to increase the prices of their services in order to deal with their problems.

He told the STA that some private providers used the increase in the minimum wage to hike up their prices by 20%. He rejected the reasoning that trade unions could be responsible for the growing prices in any way.

Fellow trade unionist Jakob Počivavšek noted that the government had committed to cover the higher pay costs for the services which are paid for from the budget directly or indirectly.

The Labour Ministry said it was seeking to agree an increase in the funds that the public health insurer pays to retirement homes for health services.

Local communities also urged the government to secure additional funds to municipalities to cover for higher labour costs. They want the per capita funding to increase beyond the EUR 20 agreed in November 2018.

The government responded by saying that the November agreement included a commitment for the government and municipalities to assess the impact of the public sector pay rise on municipality finances in mid-year.

The government has also appointed a taskforce comprising representatives of government departments and municipality associations to examine municipality legislation and their responsibilities and to draw up measures to reduce their costs.

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