Saturday, 6 November 2010

NSW government - burning our money

I exercised the brain a bit tonight by crunching a stack of numbers from a series of RailCorp annual reports. I chose RailCorp because they used to include statistics on how much they paid their staff - at least they did up until the 2007 report, when it probably became too embarrassing. Here's a table from the 2003 report, showing the number and percentage of staff in each income bracket. This has to be taken with a pinch of salt - the railways underwent a restructure around then, and staff were shuffled between the various old railway companies. However, it shows that most staff were pulling in around what is the median income in 2010 (about $1,000 per week), with very few in the highest grades.

The next table shows the results for 2003 to 2006. Yes, it's a bit small - sorry. What stands out though is that over those few years, the income brackets shot up 23%. We didn't have inflation of 23% between 2003 and 2006, but RailCorp certainly had wage inflation of 23% or more. I've put the raw numbers down the bottom of this post as a footnote.

The next thing that stood out is the leakage of people into higher grades. Instead of showing raw salary bands, I've split it into 7 salary bands. What you can see is that between 2003 and 2006, the percentage of staff in the top three bands (levels 5, 6 and 7) grew quite substantially.

In 2005, RailCorp had 10,724 employees. Of those, 720 were in the top two bands. 469 were earning between $75,331 and $94,165, and 251 were earning over $94,165.

In 2006, RailCorp had grown to 13,256 staff - an increase of 2,802. However, the numbers in the top two bands had grown from 720 to 1612. Overall staff numbers grew by 26%, but the numbers in the top two bands shot up by 223%.

In 2007, RailCorp grew slightly from 13,256 to 13,805 - an additional 549 staff or 4% growth. The top two bands grew from 1612 to 1741 - growth of 129, or 8% - double the growth in total staff numbers.

At that point, RailCorp ceased the publication of this information.

Here's my best attempt at charting this change. Unfortunately, the numbers here are skewed by 2003, which was an odd year due to all the restructuring that went on. However, you can see a steady drift into the upper bands.

Here's the chart with 2003 removed - the percentage of staff in the 2nd lowest pay bracket dropped significantly, but there was robust growth in the top three bands. This is an old trick that the public sector loves to play - when wage growth is capped by the government, managers scheme to promote each other into the next pay band by regrading jobs etc - that's a great way to get a whacking big pay rise.

But as they say folks - "That's not all". For you see, these tables don't include the number of executives, who are listed separately.

In 2003, when RailCorp only had 3563 staff, it had 11 executives earning $205,000 to $430,000. The total pay packet for the 11 execs was $2.86 million.

In 2004, although staff numbers had shot up to 10,724, there were only 15 executives at a total cost of $3.97 million.

In 2005, staff numbers grew again to 13,256, and executives grew to 19 - but the total cost shot up to $4.96 million.

In 2006, there were suddenly 37 executives, even though staff numbers increased slightly to 13,805. The total executive bull blew out to $9.7 million.

Since then, the number of execs has stayed at around 37, and last year, the bill for them was $10.1 million. And here we have a chart of all those numbers.

Here's a chart that might be a bit tricky to explain. What I'm trying to show here is the impact on the payroll of staff moving into higher pay bands.

We have 7 pay bands, ranging from $30,000 to $90,000 (assuming no inflation). In 2004, 2.3% of staff are in band 1, 3% are in band 2, 1.9% are in band 3 etc etc. What we know now is that quite a few people crept into the top three bands - what impact would this have on the payroll?

Using these nominal numbers, you can see that the overall payroll (assuming no pay increases based on inflation and no change in staff numbers) would grow from $53.80 to $57.60 - a 7% increase. And that's just for the middle managers and front line staff. That's a 7% cost increase over 3 years simply from bumping middle managers into higher pay grades.

What also happened between 2003 and 2006 is that the pay grades themselves went up 23%. That is, band 1 went from less than $27,606 in 2003 to $33,910 in 2006. The top band went from $82,914 to $101,849. They went from having 2% of the workforce in the top two bands in 2003 to 12% in the top two bands in 2006.

If you get 7% cost increases from bumping managers into higher grades, plus a 23% increase in the underlying pay grades, you suddenly get explosive wage growth over just 3 years. And you thought all the extra money being tipped into public services was being spent on things like better track and cleaner trains.....

How does that compare to the general population? Well, here's a chart of the number of Australian taxpayers in various brackets for 2009. There are 9.6 million Australians paying income tax, and 59% of them earn less than $55,000 per year. 77% earn less than $75,000 per year. 89% earn less than $100,000.

I've tried to match up the income tax table with the salary bands at RailCorp.

I think - and I mean "I think" - this shows that your average public servant is earning more than the average taxpayer that supports them. I've prattled on too long to comment on whether that is a good or desirable thing or not - or a necessary thing. That can wait for another night when I'm bored.


Salary bands


> $82,914





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