EurWORK European Observatory of Working Life

Irish social partners endorse new national agreement

About

Country: 
Ireland
Author: 
Tony Dobbins

In March 2000, the Irish social partners formally endorsed a new tripartite national agreement, the Programme for Prosperity and Fairness (PPF), the fifth successive national deal since 1987. During this time, the context of social partnership has changed from "managing crisis" to "managing growth and rising expectations", throwing up a number of challenges and tensions. The PPF provides for pay increases of at least 15% over 33 months, along with a range of measures in areas such as taxation, equality and social inclusion.

In November 1999, negotiations began over a new national agreement to replace Partnership 2000 (P2000) (IE9702103F), which was due to expire in March 2000. The talks (IE9911146F) involved the Irish government, the Irish Congress of Trade Unions (ICTU), employers' and business representatives and the voluntary and community sector. Employers' and business interests were represented by the Irish Business and Employers Confederation (IBEC), plus organisations such as the Construction Industry Federation (CIF), the Irish Farmers? Association (IFA), the Irish Creamery Milk Suppliers? Association (ICMSA), the Irish Cooperative Organisation Society (ICOS), the Small Firms? Association (SFA), the Irish Exporters? Association (IEA), the Irish Tourist Industry Confederation (ITIC) and Chambers of Commerce of Ireland (CCI). The voluntary and community sector was represented by the Irish National Organisation of the Unemployed (INOU), Congress Centres for the Unemployed, the Community Platform, the Conference of Religious of Ireland (CORI), the National Women?s Council of Ireland (NWCI), the National Youth Council of Ireland (NYCI), the Society of Saint Vincent de Paul and Protestant Aid.

The context of the negotiations

The Irish socio-economic context has changed over the course of recent years from "managing crisis" to "managing growth and rising expectations". The social partnership process has gradually evolved to take account of this fundamental change. During the 1980s, the Irish economy was in serious crisis, and burdened with mass unemployment, falling living standards and huge debt. Since then, Ireland has experienced exceptional growth and rising living standards, and the economy is gradually edging towards full employment. Successive national agreements based on "negotiated consensus" have played a significant part in this success. However, the continuing economic boom has fuelled rising expectations, throwing up new challenges and tensions (IE9911146F). These challenges and tensions currently revolve around three main issues: income distribution; pay determination; and social equity.

Existing tensions over income distribution and social equity were further fuelled by the highly controversial contents of the Finance Minister's 2000 state budget, which was issued in December 1999. The 2000 budget was widely perceived as disproportionately benefiting the better off at the expense of low-paid workers and marginalised groups. The level of opposition to the budget forced the government to backtrack somewhat, and as a result, various "rebalancing" measures are due to be introduced in April 2000 in a Social Welfare Bill to improve the position of the low paid. These measures will consist of exempting low-paid workers from social insurance (PRSI) contributions and raising the earnings threshold at which the health insurance levy applies.

The budget controversy exacerbated the obstacles that already existed in securing a new national agreement. Nevertheless, after a period of intensive negotiation and discussion, agreement on a Programme for Prosperity and Fairness (PPF) was eventually reached in February 2000 (IE0002205N).

In late March, the main social partner organisations formally endorsed the PPF. On the employers' side, a comfortable majority on the IBEC general council approved the agreement. However, there was more division on the trade union side, with strong opposition from some unions. Nevertheless, two-thirds of the delegates at a special ICTU meeting on 23 March endorsed the PPF, with 251 voting in favour and 112 against.

Main contents of the PPF

The PPF is structured as a set of five "operational frameworks", covering: living standards and workplace environment; prosperity and economic inclusion; social inclusion and equality; successful adaptation to continuing change; and renewing partnership. The programme contains a wide range of measures in a large number of areas (including matters such as public transport, housing, rural development and industrial policy), and below we highlight the key points of direct relevance to industrial relations.

Pay

The central component of the PPF is a 33-month pay agreement (annexed to the programme) that will provide a minimum 15% pay increase, or 15.8% on a cumulative basis. This will consist of: 5.5% (with a minimum increase of IEP 12 per week) in the first year; 5.5% (with a minimum increase of IEP 11 per week) in the following year; and 4.0% (with a minimum increase of IEP 9 per week) for the final nine months. The minimum increases of IEP 12, IEP 11 and IEP 9 per week respectively, mean that the pay of low paid workers (those currently earning below IEP 210 per week) may increase by up to 17.8%. In addition, there is to be a separate one-off "catch-up" pay award of 3% for civil servants and teachers, payable from October 2000, because, as so-called "early-settlers" under the previous agreement, their pay fell behind other public sector groups which settled later.

In an effort to escape the "stranglehold" of pay relativity claims within the public sector, the social partners have agreed to set up a new "benchmarking body" with a remit to establish fair comparisons between the pay of public service workers and similar groups in the private sector.

The agreement also sets out a new role for the Labour Court in deciding what constitutes a breach of the PPF wage agreement: "Where a dispute arises as to what constitutes a breach of the agreement, that will be referred to the Labour Court and the parties shall agree to comply with its findings."

Finally, as previously agreed (IE9907140F), a statutory minimum wage is to be introduced from 1 April 2000. The initial rate will be IEP 4.40 per hour, increasing to IEP 4.70 on 1 July 2001 and to IEP 5.00 from 1 October 2002.

Tax

The PPF contains three key tax policy commitments:

  • ensuring overall increases in net take-home pay of up to 25% or more over the lifetime of the PPF, as a result of combined pay and tax provisions;
  • removing all earnings below the minimum wage threshold from the tax net; and
  • ensuring that 80% of taxpayers do not pay tax at the higher rate.

Social inclusion

A wide range of "social inclusion" and measures are contained within the PPF. These include: moving towards a target for a minimum social welfare rate of IEP 100 per week; a substantial increase in child benefit; increasing the supply of affordable social housing; and increasing investment in health services.

Equality and family-friendly policies

The PPF describes equality of opportunity and the elimination of discrimination as "key aspects of a modern, open inclusive society". The programme will thus support practical policies and measures to promote equality through: a progressive legislative framework which eliminates discrimination in employment and in services; institutions to combat discrimination and to provide redress and support to people experiencing problems; further measures to tackle equality issues; and a system of "equality proofing" and ongoing monitoring mechanisms. A specific measure is that, in response to the challenges arising from the implementation of the Employment Equality Act 1998 (IE9909144F), and in order to promote equal opportunities in the workplace, a "framework" will be established, comprising representatives from IBEC, ICTU, public service employers and the Department of Justice, Equality and Law Reform. This structure, which will have a specific budget, will assist in the development and implementation on a voluntary basis of equal opportunity policies at enterprise level and provide encouragement, training, information and support to employers and employees and their representatives. It is recommended that equal opportunities policies/practices be developed and implemented, on a voluntary basis, at enterprise level by agreement between employers and unions. Issues identified as appropriate for discussions at enterprise level include: policy statements/equality programmes; positive action programmes; policies on sexual harassment, harassment and bullying at work; racial equality policies; and guidelines to implement support mechanisms at work for victims of domestic violence.

The programme "recognises that policies to support childcare and family life are a cornerstone of future social and economic progress", and thus aims to: increase childcare places in both the private and community sectors; promote appropriate training of childcare workers and regulation of childcare provision; increase out-of-school hours childcare services provided by community groups and school managements; and further national fiscal and social policy measures to reconcile work and family life, including "family-friendly" policies in employment. A specific agreement provides a national framework for the development of family-friendly policies at the level of the enterprise, promoting enterprise-level agreements between employers and unions on issues such as jobsharing, worksharing, part-time work, flexitime, "flexiplace"/teleworking; and term-time working.

Employee financial participation

The PPF contains a "partnership clause" that builds upon the provisions of P2000 (IE0001204F), and provides for the voluntary establishment and deepening of new forms of employee financial participation such as gainsharing and profit-sharing.

Potential implications of the PPF

The potential implications of the PPF can be examined under a number of headings.

Income distribution

The combined "package" of measures contained in the PPF - namely pay increases, the minimum wage, tax reforms, and the budget "rebalancing" measures - should deliver significant improvements in the living standards of low-paid workers. However, given that there are no provisions for substantial flat-rate pay increases, which would have helped to reduce the gap between the low paid and the better off, the impact on reducing overall income inequality is likely to be modest - especially as the tax burden on the "corporate elite" and other wealthy sections of society has been dramatically reduced over the course of recent years.

There has been increased concern amongst trade unions and workers in recent months that rising inflation will erode the PPF pay increases, and by implication workers' living standards. This has provoked increasingly vocal union opposition to the PPF, particularly from the UK-based union, the Amalgamated Transport and General Workers Union (ATGWU), which has consistently opposed centralised agreements. Most unions, however, endorsed the agreement, despite concern over rising inflation. The inflation rate has risen from 3% in November 1999, to a March 2000 figure of 4.3%. The economy is undoubtedly showing some signs of overheating, with rising house prices and increased labour and skill shortages. The targeting of tax cuts at the higher paid in the 2000 budget exacerbated the situation. In terms of "external shocks", rising world oil prices and the weakness of the euro single currency have also contributed to inflationary pressures. However, most economists believe that inflation will decrease later in 2000. Much depends, however, on whether there is a fall in oil prices. It is certainly true that with a current inflation rate of 4.3%, the PPF wage increases of 5.5% do not appear particularly generous. It is important to qualify this, however, because even if inflation averages 4% for 2000 as a whole, the combined PPF "package" of pay increases, tax reforms, a national minimum wage, and the budget "rebalancing" measures, should still bring significant gains for many workers.

Pay determination

The government and the social partners have recognised the importance of introducing new forms of pay determination in both the private and public service sectors. The PPF contains various provisions aimed at reforming pay determination.

In the private sector, it has generally been accepted that a greater emphasis needs to be placed on diffusing new forms of employee financial participation, such as gainsharing and profit-sharing schemes. These schemes allow employees to share in productivity gains at the workplace. The wider diffusion of such schemes would appear to be particularly important at a time when inflationary pressures have been growing. Furthermore, because there is little or no scope for further income tax cuts (but still great scope for tax reform) - at least without having a detrimental effect on investment in public services - it appears that alternative means of compensating workers need to be examined.

It remains to be seen whether the "partnership clause" in the PPF can facilitate a wider diffusion of financial participation. As was the case under the rather loosely worded partnership clause in P2000, there is a renewed emphasis on the voluntary nature of partnership initiatives. Employers are obliged only to engage in discussions on partnership topics, and nothing more.

In recent years, pay determination in the public services has proved to be a more complex and thorny issue than in the private sector (IE9909292N). The nine-day nurses' strike in October 1999 was a stark illustration of this (IE9912202N). The government had hoped that provisions in the PPF for a 3% "catch-up award" for teachers and civil servants, together with plans for a new pay benchmarking body, would help to resolve the problem of pay relativities and restore stability to public service pay determination. This now looks very doubtful, given that considerable tensions remain within the education sector. One of the three teaching unions, the Association of Secondary Teachers, Ireland (ASTI), argues that the pay provisions within the PPF are inadequate. It has therefore severed its links with ICTU and lodged a "go-it-alone" 30% pay claim, which the government has rejected. ASTI is seeking a wage increase to match that conceded by the government to the nurses in 1999. More generally, there is a feeling amongst teachers that their relative living standards are slipping in comparison with other workers in a booming economy.

Social equity

The PPF incorporates a much wider range of social inclusion and equality measures than its predecessors, where competitiveness and economic growth were the overwhelming priority. These measures will potentially go some way towards improving the living standards of welfare recipients, unemployed people, and other marginalised groups. The PPF affords a much more prominent role to the "social pillar", which incorporates various community and voluntary groups - such as INOU, CORI and NWCI (see above) - than was previously the case. The increased prominence of the "social pillar" has meant that issues such as social inclusion and social cohesion are beginning to receive much greater attention than in the past. Significantly, the "social pillar" managed to secure the inclusion of an "escalator clause" in the PPF. This clause implies that any additional resources resulting from levels of economic growth that exceed what is forecast in the agreement will be channelled into the priority objectives of PPF, including social inclusion. However, although the PPF provides a framework for addressing social equity issues, it remains to be seen to what extent the living standards of marginalised groups will improve, and the degree to which social inequality and poverty will be reduced. Significant challenges remain, some of which are not fully addressed in the PPF. For instance, there are no firm commitments on pegging social welfare rates to the 50% of the average earnings level, which could help to alleviate poverty, or on markedly improving childcare provisions.

Commentary

The obstacles facing the social partners in securing a new agreement in a context of economic boom and rising expectations were considerable. This was largely because the gap between employee and union expectations and what employers were prepared to concede - at the outset, at least - was wide. Despite these obstacles, the social partners have formally endorsed the new agreement, albeit after considerable difficulty, hard work, and some strong opposition. There is a widespread feeling that the alternative to centralised agreements, a return to "free-for-all" local collective bargaining, is not desirable.

There can be little doubt that centralised national agreements in Ireland are at a crucial juncture. Having successfully contributed to economic growth and improved living standards for many people over the course of recent years, a key question now is whether the new agreement can help to maintain industrial peace in a context of rising expectations.

Significantly, if it is viewed as a broad pay, tax and social inclusion "package", then the PPF has the potential further to improve the living standards of many workers, as well as many people who are outside the labour market. A particularly important development is the various measures aimed at improving the position of low-paid workers and the various marginalised groups represented by the "social pillar". The PPF affords the "social pillar" a much greater input than under previous agreements, with the social partnership process encompassing a much broader range of issues than the first agreement, the Programme for National Recovery, which was introduced at a time of crisis in 1987.

Notwithstanding the various potentially positive implications of the PPF, a number of challenges and tensions are evident. In particular, the issue of reforming public service pay determination is likely to continue to prove to be a very thorny issue. The prospects for ensuring industrial peace in the public services would appear to be questionable, especially if the current confrontation between the teaching union, ASTI, and the government escalates. (Tony Dobbins, UCD)