Irish national pay talks break down

August 5th, 2008 | by Andrew Ó Baoill |

Talks on a new national social partnership agreement – which includes agreement on pay in public and private workplaces – have broken down in Ireland. Ireland has had centralized agreements covering pay and other issues since the late 1980s. These have ensured a voice for unions (and employers) in setting broad economic policy, but in a period of unprecedented growth have also muzzled workers’ ability to demand a larger slice of the expanding pie. Increases have generally been set as percentages of current wages, and sometimes tied to ‘productivity’ increases, rather than having links to revenue or profitability.

Employers, on the other hand, have been able to plead ‘inability to pay’ on the basis of competitiveness to default on promised increases (admittedly with a review process through the LRC), and the agreement is actually voluntary for individual employers (who have not previously paid raises in line with previous agreements). The agreement basically provides a framework within which industrial conflict is contained. The agreement (in section V, part 1.4):

 

Provides that no cost-increasing claims by trade unions or employees for improvements in pay or conditions of employment, other than those provided in Sections 1.6, 2.1 and 3.1 will be made or processed during the currency of the Agreement;

Commits employers, trade unions and employees to promoting industrial harmony; and

Precludes strikes or other forms of industrial action by trade unions, employees or employers in respect of any matters covered by this Agreement, where the employer or trade union concerned is acting in accordance with the provisions of this Agreement.

 

This binding of employees’ striking ability (the only real effect of the above section) has been good for employers, and to some extent for the economy, reducing risk for inbound investment, and has allowed unions to play on a broader field than might have been possible had they to chase agreement workplace-by-workplace. Now that things are getting more difficult in the economy, it has proven more difficult to reach agreement.

One area, other than pay, that was important to unions was improving the ability of workers to join unions – particularly ‘temporary agency workers’. At European level the Irish government had been one of a small minority blocking agreement on providing agency workers the same rights of representation as directly employed workers prior to an agreement last June that []. Employers have, unsurprisingly, opposed union calls for agency workers to have the same rights as other workers – claiming it would be bad for agency workers. Unions were unable to make much progress on the issue in talks:

The employers were refusing to budge on granting better representation rights for unions, arguing that the Supreme Court had made a clear decision on the issue. The unions were equally firm in insisting that the pay and conditions for temporary agency workers should be the same as those of other workers.

Given the opposition of employers, and the generally lousy performance of the government on this issue, unions had decided to set aside the representation issue in order to make some progress on pay. Here, however, they also faced serious hurdles. Unions were looking for a 5% raise for all workers – and admitted after talks broke down that they would have accepted less, had they been able to guarantee the situation of lower-paid workers – hardly excessive, given that the annual rate of inflation is at 5% in June, and has hovered between 4.6% and 5.2% since January of 2007. The previous pay agreement, finalized in June 2006,provided for increases of 10% over 27 months – approximating to 4.3% (cumulative) raises per annum – which has failed to keep up with inflation.

Employers, on the other hand, have sought a pay-freeze for 12 months, with a 5% raise over the next 9 months – with ‘vulnerable’ sectors exempt from any raise whatsoever. [It should clear that a pay freeze, when inflation is at 5% p.a. is, from the employees’ perspective a pay cut of 4.8%.] Their argument is based on the worsening state of the economy, and claims that there will be increases in unemployment if they are forced to make pay raises in line with inflation.

The Irish economy is certainly in trouble – the ESRI predicts contraction in GDP of 0.4% in 2008, and growth of only 2% in 2009. However, it seems that there is never a ‘good’ time for workers to push for a greater slice of the pie. When things are going well, higher wages might cause ‘overheating’ and unrest could destabilize matters, reducing investor confidence and messing things up for ‘everybody.’ When things are going poorly, wage increases could cause difficulties for ‘vulnerable’ employers, fueling inflation, and making things even worse.

The national agreements, while ensuring a stability (i.e. lack of risk for investors) that encouraged investment that might not otherwise have occurred, have undoubtedly taken place at a cost for employees. The increases allowed for in the various agreements between 1988 and 2008 have provided just over 100% increases in wages over the 20 year period (when compounding is taken into effect), somewhat ahead of CPI compound growth of 82%. However, over just the period from 1988 to 2003, GDP (at 1995 market rates -that is, in volume terms rather than resulting from price inflation) almost tripled (2.8 times 1988 level). In ‘current prices’ (rather than volume) the increase is even more striking (as it also reflects price increases) –€30.084bn in 1988, to €190.6bn in 2007 (that’s a 6.3-fold increase over that period). Where did this extra wealth go?

A large portion of the extra GDP made its way to workers by way of increased employment (an increase of 92%, from 1.11m to 2.14m from April ’88 to February ’08). Coupling the increase in employment levels (and presuming ’employed’ grew at the same rate as ‘in employment’ (which includes the self-employed)) with the wages gains from the pay agreements, we would expect wage payments in 2008 to be about 3.84 times the 1988 level. In fact, CSO figures show employee costs in 1990 as £13.2bn (€16.8bn – figures for 1988 are not available online) and in 2005 as €66bn, or 3.93 times the 1990 amount. This would indicate a move towards somewhat better-paying employment, which is in line with the moves away from agriculture.

However, a significant portion of growth did not make its way to workers. Note what I’m saying here: notwithstanding the doubling of the labour force, wages declined significantly as a proportion of the economy between 1988 and 2007 – from something around 50% to around 35% (estimating here, as I don’t have 1988 and 2007 figures for employment). Some of the gap is undoubtedly a result of increased investment in infrastructure and research, elements that increase the capacity of the economy and thus benefit current and future generations. However, workers can be forgiven for not readily accepting that they must be the ones to bear the brunt of a wobble in the economy, by way of across the board freezes in wages – which as I point out above are effectively wage cuts.

After the national pay talks broke down, the unions were ‘expected‘ to start briefing local unions on bargaining at a local level, with a strategy of targeting companies that could afford to pay increases, hoping that this would set a broader trend. IBEC (the employers’ body), in contrast, instructed its members not to engage in local bargaining. This, of course, illustrates the problem for unions of the bargaining process – when talks on a national agreement broke down, the status quo (no increases) was exactly what employers had been seeking. The task for unions is to persuade employers – and they have few weapons in their arsenal – that the status quo is not all it’s cracked up to be – that negotiating in good faith with unions, and providing at least cost-of-living increases, is a preferable path. SIPTU has rattled the sabre by noting that the reputed directive from IBEC would breach many local collective bargaining agreements, and prompt increased, and earlier, industrial unrest.

The Irish economy is projected to improve next year (just as many pay raises under any new agreement would start to become due). Unrest in the labour market, whatever the cause, could adversely affect that recovery. However, I can’t read that as meaning that unions should just roll over and accede to any and all employer demands. Some concession by employers on pay is necessary – and ICTU has indicated possibly fruitful directions for progress (including an emphasis on protecting lower-paid workers). One would imagine that, in lieu of pay, concessions on the rights of agency workers would be a ‘cheap’ option for employers, but of course, as always, that’s probably less acceptable to employers than just paying over extra cash.

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