Recent changes in public sector employment in OECD countries

Posted on September 02, 2015 by Daragh McCarthy

Public sector employment
NERI blog on public sector employment in the Republic of Ireland

The scale of public sector employment varies considerably across developed economies; however, the vast majority of EU member states are in a process of reducing the size of central government employment—between 2008 and 2013, Sweden was the only EU country that increased the number of general government employees.

Widespread reduction in public sector employment

Countries most severely impacted by the 2007 financial crisis and subsequent domestic economic challenges experienced the greatest level of reduction in public sector numbers; the Republic of Ireland is one of six OECD countries—including Greece and Portugal—to report a “high decrease” in central public administration between 2008 and 2013. Total public employment in Ireland as a proportion of the overall labour force decreased from 18.3 per cent to 17.4 per cent between 2011 and 2013. This reflects a reduction in the absolute number employed directly by the state and the fact that practically all of the increase in employment in that period was in the private sector due to moratorium on recruitment in the public sector. In allocating resources for the recruitment of 1,700 full-time posts in the education and policing, Budget 2015 ended the moratorium on recruitment the public sector in the Republic.

With efforts to significantly reduce the size of the public sector underway, Northern Ireland—where public sector employment is 31 per cent of total employment—is set to become the latest economy to follow the trend of reduced direct government employment. A recent NERI inBrief examining the potential impact of the scheme on the Northern Ireland economy found the policy could widen the gender pay gap and may have a disproportionate impact on certain regions.

Outsourcing and recruitment freezes

As shown in the OECD’s feature on employment reforms in central government since 2008, recruitment freezes and outsourcing are widely used methods of reducing employment levels in the public sector—recent NERI research on outsourcing and value for money is available here . Just under two thirds of OECD countries reported high or moderate levels of reductions in public employment between 2009 and 2013 indicating that central government employment levels are determined by more than just the economic and fiscal position of a country. Demographic challenges, changing work practices and governance reforms have an important role to play in decisions regarding the appropriate level of employment in the public sector. 

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