The criteria for being covered by the pension-related deduction are that one is a public servant (defined in section
1 of the Act) and
a) is a member of a public service pension scheme (defined
in section 1 of the Act) or
b) is entitled to a benefit under such a scheme or
c) receives a payment in lieu of membership in such a scheme.
In outline terms, the deduction applies to public servants who are employed by or hold an office or position in a public
service body and are members of a public service pension
scheme.

And the insider-outsider perspective predicts that faced with the inevitability of a pay cut, the insiders would choose the pension levy over an actual cut. The levy keeps all the pay scales and relativities intact, it’s tax deductible and therefore hit to net pay far smaller than gross for the higher earners, and should the public finances ever improve enough that there’s some money to go around, it can be unwound without raising media hackles about a pay raise.

It should be pointed out that although public sector gross wages haven’t decreased, net wages have been reduced as a result of the pension levy which was applied to all public servants (regardless of whether they were entitled to an actual pension or not.

If this trend continues, there is going to be a major generational clash.

The younger generation is being told that they can’t have the pensions and wages that their parents had, but they have to pay for wage and pensions that there parents got.

Very similar situation here in Spain, with even less moves to do anything to correct things.

Indeed I am now describing the situation here as one of “pre-crisis” rather than actual crisis, since two thirds of the population have in fact had a very good year of it, “salarymen”, pensioners, and government employeees.

The crisis so far has hit young people under 25, low skilled workers (mainly immigrants) associated with construction, small businesses and some parts of the private sector, and that’s about it. Especially with prices falling and interest rates down.

The crisis is now almost certain to be a fiscal crisis of the state, and the vice will start to close here after next summer as taxes start to go up, and interest rate tightening at the ECB starts to push up mortgage costs again.

What we have, it seems, are two problems waiting to happen.

“There may be an implicit assumption of the insiders that the people who lose out in this deal can ultimately emigrate.”

Yep, this could become a real problem in Spain. Someone I met back from Florida this week told me young Spanish graduates are starting to show up there looking for work. If this really takes off, then the housing market will never stabilise, and, of course, the pension systems will become even more problematic.

In order for the CSO’s numbers to definitively indicate pay cuts or rises on an individual, we would also need to see the average wage across the jobs lost. This is likely to skew lower, due to LIFO redundancy policies and clustering of job losses among the young and inexperienced.

But other than that, your point about the insider/outsider divide is well made.