In May 2004, Ireland’s social partners were in the process of setting out their positions for talks on stage two of the pay element of the current national wage agreement, Sustaining Progress. The ICTU trade union confederation called for a pay increase based on a combination of inflation and productivity forecasts, while its largest affiliate, SIPTU, agreed to re-enter the talks process after previously boycotting it. Meanwhile, the IBEC employers' organisations warned that excessive pay demands could damage competitiveness.
Unusually for Ireland's six national wage agreements to date, the pay element of the current deal, Sustaining Progress (SP), was divided into two 18-month stages, as a result of uncertainty when it was negotiated in 2003 (IE0301209F and IE0304201N). Stage one of the pay element of SP expires in June 2004 in the private sector, and the end of December 2004 in the public sector. It provided for a 7% pay increase over 18 months - in three instalments of 3%, 2% and 2%. The parties are now facing negotiations on the second 18-month stage of SP, which will apply until the end of 2005 - with a settlement expected by June or early July. The overall three-year SP deal (2003-5) also incorporates a social programme, including a commitment to an expansion of affordable social housing.
ICTU position
According to the independent Industrial Relations News magazine, the opening position of the Irish Congress of Trade Unions (ICTU) for the stage two SP pay talks will be based on anticipated inflation and productivity figures over the next 18 months or so. In a briefing on the pay talks on 22 April, the ICTU general secretary, David Begg, did not explicitly state the figure that would constitute its opening position. However, in a statement on the talks, ICTU stated its belief that 'a pay increase based on anticipated inflation levels and productivity growth over the next 18 months is appropriate'.
Given that ICTU predicts inflation for 2004 and 2005 in the region of 2.0% to 2.5%, and labour force productivity growth of 4.6% for 2003, then it appears that its opening position could be a pay increase around the 7% mark over the 18 months of stage two of SP. Such a position would be similar to the 7% settlement under stage one of SP, but inflation was at a much higher level at that time. ICTU leaders know that inflation projections are low but they believe that a combination of oil prices and a weak US dollar could mean that prices have already bottomed out. Inflation could thus start to rise somewhat over the summer of 2004. ICTU also knows how hard it is to track productivity growth, with sectoral differences making an acceptable average figure hard to find.
ICTU is also under pressure from a number of private sector unions, especially the retail and bar workers' union MANDATE, which are of the view that the lower-paid must receive more attention in the new pay round, with a flat-rate component to the increase and further adjustments in the minimum wage. There was no flat-rate wage element in the first stage of SP. ICTU feels that taxation changes announced by the Minister for Finance as part of the 2004 state budget were regressive and need to be corrected: 'His failure to broaden the tax bands has resulted in more workers paying income tax at the higher rate. This runs contrary to the clear policy position as set out in Sustaining Progress 'that not more than 80% of all earners pay tax at more than the standard rate'. The Minister also failed to make any further progress on 'removing those on the minimum wage from the tax net'.'
ICTU has also called for an increase in the resources available to the Labour Inspectorate and a broadening of its remit and jurisdiction to police labour standards - a significant concern among many affiliated unions. More generally, it wishes to negotiate: improvements relating to redundancy payments/ceilings on weekly earnings; a framework agreement on information and consultation (IE0309204F); and securing tangible improvements in work-life balance, for instance, by allowing claims for extra leave.
Significantly, ICTU is satisfied with the operation of the novel 'ability to pay'/pay compliance mechanism (IE0312204F) introduced under the first stage of SP, suggesting that the process 'can be very educational for workers'. None of the main participants have made negative comments about the new enforcement mechanisms, which suggests that they are working well.
Economic outlook
In a recent economic outlook, the ICTU economic advisor, Paul Sweeney, suggests that the international economy has picked up significantly, and growth rates of 3% or above in GNP are expected in 2004 and 2005 for the Irish economy. Despite the recent downturn, the unemployment rate has remained below 5%, while inflation has fallen to 1.7% and is forecast to stand at between 2.0% and 2.5% for the period of the next pay round. However, this is by no means guaranteed, and ICTU believes that a number of issues need to be considered in the 'inflation mix', such as high prices, the international recovery and a strengthening US dollar, and the impact of 'stealth taxes' and rising indirect taxes. In particular, it argues, the cost of living in Ireland is still 14% above the EU average, despite declining inflation.
ICTU argues that although it is true to say that wages in Ireland have been rising faster than in other EU countries in recent years, this has been a process of catching up, with Irish wage levels remaining at the lower end of the 'euro-zone' spectrum - hourly labour costs remain at 20% below the EU average, it claims: 'A measure of disposable income compares us more favourably but the conundrum is that public service provision in Europe is more extensive, saving on disposable income, and indirect taxes on services and consumption in Ireland are at a high level.'
Turning to the productivity data, ICTU suggests that manufacturing output rose by 6.7% in 2003, with production in the 'multinational sector' up 7.9% and output in the 'indigenous sector' up 2.4%. Given that manufacturing employment fell by 5% and output rose by 6.7%, manufacturing productivity rose by around 12%, ICTU claims. Nor is this growth solely limited to the multinational sector, it argues, as employment in indigenous manufacturing fell by 4.5% last year, which implies that productivity in this area grew by around 7%, taking 2.4% output growth into account.
In terms of labour productivity, ICTU refers to the EU's European Economy Review 2003, which concluded that the rise in labour force productivity in Ireland for 2003 was the highest in the EU at 4.6%, and well above the EU average of 0.6%. ICTU argues that there has been rapid labour productivity growth in Ireland in recent years, and that unit labour costs have fallen to 60% of what they were in 1995.
However, the Prime Minister (Taoiseach), Bertie Ahern, has recently quoted figures from the independent Economic and Social Research Institute, indicating that measurements of Irish productivity have been distorted by the contribution of a limited number of high-value-added activities.
Acknowledging the divergent business conditions experienced across the economy, and pinpointing a potential way round this in the guise of innovative local bargaining, the ICTU statement on the stage two pay talks says 'it is an inherent difficulty of the pay component of partnership agreements to find a methodology which covers difficult trading conditions in different sectors without threatening employment on the one hand or adopting a lowest common denominator on the other. Local bargaining is an obvious option, particularly embracing gainsharing models, but this has rarely found favour with IBEC.'
SIPTU to re-enter talks
ICTU's largest affiliate, the Services Industrial Professional and Technical Union (SIPTU) - a general union with over 200,000 members - recently decided to re-enter talks on stage two of SP, after previously boycotting the opening of talks. This boycott had reflected fears among members that there could be a 'race to the bottom' with regard to employment rights in the current proposed restructuring of the state-owned transport companies, CIE (rail and bus) and Aer Rianta (airports). The Transport Minister is proposing to open up 25% of the Dublin bus market to private sector competition and to break up Aer Rianta (IE0403202F). These issues have not yet been resolved and problems could resurface at any time, given that SIPTU and its members are distrustful of the Minister’s intentions, despite having received assurances from Mr Ahern, who is seen as being perhaps the unions’ main 'ally' in the current government.
IBEC pay warning
Meanwhile, Ireland's main employers' body, the Irish Business and Employers Confederation (IBEC), has warned against excessive pay increases under the second stage of SP. Insisting that the priority must be to win the 'race to the top of the competitiveness league table', the IBEC director, Brendan McGinty, said that several trade union leaders 'talk about the possibility of a deal based on inflation and economic growth, which is ridiculous'. He said the SP pay agreement has already been substantially 'front-loaded': 'The 7% available over the first 18 months broadly match the likely out-turn on inflation for the full three-year period. The room for manoeuvre on pay is extremely limited with the strength of the euro against the dollar and sterling exacting a major toll on the traded sector, a rise in the number of redundancies at over twice that for the year 2000 with industrial employment badly hit.'
Unions cannot have it both ways, Mr McGinty, said: 'When inflation was high they had sought high pay increases. Now when inflation is at 1.3% it is being conveniently downplayed in favour of the ruse of economic growth to create aspirations, which cannot be met.' IBEC rules out any additional rise in the national minimum wage for the duration of SP. Mr McGinty concluded that in the past the social partners had shown that they understood the trade-off between pay and jobs: 'This new vista brings different challenges for business, for the world of work and for social partnership. It should be recognised as an opportunity and not as a threat.'
Commentary
The trade unions' opening position in the talks over stage two of the pay element of SP could be a rise in the 7%-8% bracket. IBEC has warned that excessive pay demands could damage competitiveness, and that it would not countenance such an increase over 18 months. It is unlikely to want to concede a pay increase greater than 1.5%- 2% - ie around the current inflation mark. In practice, the actual pay increase is likely to be somewhere between the union and employer positions.
Ultimately, a deal should be reached on the second pay stage of SP by the end of June 2004 or early July at the latest, but it is not a foregone conclusion, given that a number of obstacles are in place, not least in the form of SIPTU opposition to the Transport Minister’s proposed restructuring of Aer Rianta and CIE. (Tony Dobbins, IRN)