EurWORK European Observatory of Working Life

Ireland: Evolution of Wages during the Crisis

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  • Observatory: EurWORK
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  • Published on: 09 July 2012



About
Country:
Ireland
Author:
Roisin Farrelly and Collman Higgins
Institution:

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

Trends and relations with other working conditions

Most Irish private sector firms have responded to the crisis by freezing basic pay/salary at pre-crisis levels, while extra earnings have been cut. A significant minority have also cut basic pay levels, borne out by IBEC Quarterly Business Sentiment Survey for 2009, showing 56% of employers freezing pay and 25% cutting pay in 2009. A smaller minority had moderate pay increases, mostly under a national wage agreement struck in late 2008 - which most employers did not implement and was eventually abandoned at the end of 2009, ending national wage bargaining indefinitely. In the public service, pay was reduced by a progressive scale of 5%-15% in December 2009 and net earnings were also hit by a levy from March 2009, also on a progressive scale of 5%-10.5%.

Against the background of the economic recession, this CAR will look in other words into the relationship between the recent evolution of wages and workers’ working conditions, giving particular attention to processes of pay moderation, freezes and cuts and social dialogue policies where these wage components have been traded for improvement or preservation of other working conditions. The questionnaire focuses as such on the following topics:

A description of the main wage trends in the country during the last 5 years. Attention will be paid on the one hand to dimensions of the wage evolution like wage moderation, and to a lesser extent to wage dispersion and the use of variable pay. On the other hand figures are sought according to individual characteristics such as sex, age, employment contract and occupation.

A presentation of recent national studies that investigate the relationship between wages (and their recent evolution) and working conditions aspects. Are there any specific aspects of working conditions which are particularly sensitive to the wage levels and their evolution? Some of the aspects that could be taken into account in this regard are: training, working time, work organisation, job security, job mobility and the more general indicators like well-being at work or job satisfaction.

Identification of examples of key company and/or sectorial arrangements where a trade-off between wages and other features of the employment relationship was obtained: wage moderation, wage freezes or wage cuts in exchange for improvements like job security, other forms of rewards, working time reduction, more and better training, etc..

An overview of recently implemented policies to support groups of workers that have been affected by recent negative wage trends. Examples of these policies would be, among others; minimum wage policies, training financing, social benefits like transport or housing support.

At several points in the questionnaire a sectorial approach is adopted by focusing on the following broad Nace Rev. 2 sections:

C - Manufacturing

F – Construction

I – Accommodation and food services (Hotels, restaurants and catering, HORECA)

K – Financial services, banking sector

O – Public administration

These sectors have been selected, because they seem often be the most affected by the crisis.

Questionnaire

Block 1: Wage trends 2006-2010

1.1.a Please provide annual statistics on average gross monthly earnings or yearly average wages by gender, occupational category (ISCO), part-time/full-time in your country from 2006 to the latest available year.

Average annual wages 2006 - 2010
This table gives figures on average annual wages in the period 2006 – 2010 broken down by gender and occupation. The figures are taken from the Central Statistics Office (CSO) annual yearbooks.
 

2006

2007

2008

2009

2010

Total

37,200

37,726

40,775

40,379

35,913

By gender          
1. Male

43,270

43,099

47,484

47,178

 
2. Female

30,109

31,403

33,845

33,932

 
By ISCO occupational classification          

1 Managers and administrators

.

55,768

61,690

66,743

61,287

 

2 Professionals

.

52,321

55,006

59,067

59,686

 

3 Technicians and associate professionals

.

40,616

40,583

43,764

44,315

 

4 Clerical and secretarial

.

30,257

28,954

32,004

31,015

 

5 Sales

.

23,315

26,523

26,759

24,100

 

6 Skilled agricultural, forestry and fishery workers*

.

         

7 Craft and related trades workers

.

38,659

36,478

38,778

39,613

 

8 Plant and machine operators, and assemblers

.

33,813

33,226

34,528

33,890

 

9 Elementary occupations

.

         
By contract type**          
1. Full-time          
2. Part-time          

* No figures available from CSO yearbook for this occupation group

** No figures available from CSO yearbook

Source: CSO Statistical yearbooks 2010 and 2011 (links provided below)

1.1.b Please provide the following methodological information on the provided statistics:

  • Definition of the earnings (what components are included or excluded?):

Earnings 2006 and 2007 includes regular earnings and bonuses and benefits in kind

Earnings 2008, 2009 and 2010 includes regular earnings and irregular earnings

  • Coverage (sectors excluded, if any; type of employees):

2006-2010 includes all sectors

  • Constant or current prices (real or nominal terms): current prices

  • Source data (for example administrative data; national accounts or specific survey):

Central Statistics Office Statistical Yearbook 2010 and 2011 (national survey)

http://www.cso.ie/releasespublications/documents/statisticalyearbook/201...

http://www.cso.ie/releasespublications/documents/statisticalyearbook/201...

1.2.a Please provide for the selected sectors, when available the following annual trend statistics on average gross monthly earnings and important context variables. The time period is 2006 until the latest available year.

Manufacturing
 

2006

2007

2008

2009

2010

Annual average gross yearly earnings

37,626

38,551

41,696

43,361

 
Annual average gross yearly earnings, Male    

44,689

46,559

 
Annual average gross yearly earnings, Female    

33,814

35,057

 
Total employment

293,900

299,000

287,300

258,300

240,100

Total full-time equivalents          
Average weekly working time

40 hours

39 hours

38.2 hours

37.6 hours

37.6 hours

% Productivity yearly increase          
Collectively agreed pay yearly increase in percentage

5.06%

(3% from 1st January and 2% from 1st July under Towards 2016)

5.06%

(2.5% from 1st April and 2.5% from 1st October under Towards 2016)

6.09%

(3.5% from 1st January and 2.5% from 1st July - workers on €11 per hour or less got 3% - under Transitional Agreement)

   
<Measure of wage dispersion><          

The 2006 and 2007 earnings data refers to ‘Manufacturing, mining and quarrying’.

2006 and 2007 hours data refers to ‘Manufacturing’ only

The 2008, 2009 and 2010 earnings, hours and employment data refers to ‘Industry’

The employment data refers to ‘Industry’

Construction
 

2006

2007

2008

2009

2010

Annual average gross yearly earnings

42,190

39,179

44,504

42,205

 
Annual average gross yearly earnings, Male    

44,848

43,555

 
Annual average gross yearly earnings, Female    

40,606

32,008

 
Total employment

251,600

269,900

241,400

155,400

125,300

Total full-time equivalents          
Average weekly working time

43.9

43.9

37.3

35.7

36.5

% Productivity yearly increase          
Collectively agreed pay yearly increase in percentage

5.06%

(3% from 1st April and 2% from 1st October under Towards 2016, dates set by Construction REA)

2.5%

(From 1st July under Towards 2016, dates set by Construction REA)

2.5%

(From 1st January under Towards 2016, dates set by Construction REA)

   
<Measure of wage dispersion><          
HORECA)
 

2006

2007

2008

2009

2010

Annual average gross yearly earnings

22,139

23,505

25,465

23,935

 
Annual average gross yearly earnings, Male    

30,263

27,227

 
Annual average gross yearly earnings, Female    

21,614

21,341

 
Total employment

124,800

130,600

125,400

119,800

119,800

Total full-time equivalents          
Average weekly working time    

27.2

26.3

25.5

% Productivity yearly increase          
Collectively agreed pay yearly increase in percentage

5.06%

(3% from 1st January and 2% from 1st July under Towards 2016)

5.06%

(2.5% from 1st April and 2.5% from 1st October under Towards 2016)

6.09%

(3.5% from 1st January and 2.5% from 1st July - workers on €11 per hour or less got 3% - under Transitional Agreement)

   
<Measure of wage dispersion><          

The 2006 and 2007 earnings data refers to ‘Hotels and restaurants’.

The 2008, 2009 and 2010 earnings and hours data this refers to ‘Accommodation and food services’.

Financial services, banking sector
 

2006

2007

2008

2009

2010

Annual average gross yearly earnings

50,092

54,213

58,956

56,655

 
Annual average gross yearly earnings, Male    

78,510

71,102

 
Annual average gross yearly earnings, Female    

45,825

44,422

 
Total employment

94,300

101,100

105,100

108,700

103,200

Total full-time equivalents          
Average weekly working time    

33.7

33.3

33.5

% Productivity yearly increase          
Collectively agreed pay yearly increase in percentage

5.06%

(3% from 1st January and 2% from 1st July under Towards 2016)

5.06%

(2.5% from 1st April and 2.5% from 1st October under Towards 2016)

6.09%

(3.5% from 1st January and 2.5% from 1st July - workers on €11 per hour or less got 3% - under Transitional Agreement)

   
<Measure of wage dispersion><          

2008 and 2009 earnings data refers to ‘Financial, insurance and real estate’

2006 and 2007 earnings data refers to ‘Financial intermediation’

Hours data refers to ‘Financial, insurance and real estate’

Employment data refers to ‘Financial, insurance and real estate’

Public administration
 

2006

2007

2008

2009

2010

Annual average gross yearly earnings

43,098

47,011

47,413

49,038

 
Annual average gross yearly earnings, Male    

54,029

54,592

 
Annual average gross yearly earnings, Female    

41,408

43,130

 
Total employment

102,400

102,300

102,700

107,700

107,800

Total full-time equivalents          
Average weekly working time    

35.5

36.6

36.3

% Productivity yearly increase          
Collectively agreed pay yearly increase in percentage

5.57%

(2.5% from 1st June & 3% from 1st December under Towards 2016)

2% for workers earning over €400 per week

2.5% for workers earning up to €400 per week (€20,859 p.a.)

(Paid from 1st June under Towards 2016)

5.06%

(2.5% from 1st March and 2.5% from 1st September under Towards 2016)

Collectively agreed increase not paid*

Collectively agreed increase not paid – pay cuts implemented**

<Measure of wage dispersion><          

All data refers to ‘Public administration and defence’

*Under the Transitional Agreement the following increases were due for 2009 and 2010:

An increase of 3.5% from 1 September 2009; and

An increase of 2.5% from 1 June 2010 - except for those earning up to and including €430.49 per week (€22,463 per annum) on commencement of the second phase where a 3% increase will apply.

**From January 1, 2010 pay cuts were implemented as follows:

5% cut in the first €30,000 of salary;

7.5% reduction in the next €40,000 of salary;

10% cut in the next €55,000 of salary.

Source(s): Central Statistics Office Statistical Yearbook 2008, 2009, 2010 and 2011

http://www.cso.ie/releasespublications/documents/statisticalyearbook/200...

http://www.cso.ie/releasespublications/documents/statisticalyearbook/200...

http://www.cso.ie/releasespublications/documents/statisticalyearbook/201...

http://www.cso.ie/releasespublications/documents/statisticalyearbook/201...

Towards 2016

http://www.taoiseach.ie/eng/Publications/Publications_Archive/Publications_2006/Towards2016PartnershipAgreement.pdf

Towards 2016 Review and Transitional Agreement 2008-2009

http://www.taoiseach.ie/eng/Publications/Publications_2008/Taoiseach_Report_web.pdf

1.2.b Please provide again the following methodological information on the provided statistics:

  • Definition of the earnings (what components are included or excluded?):

Earnings 2006 and 2007 includes regular earnings and bonuses and benefits in kind

Earnings 2008, 2009 and 2010 includes regular earnings and irregular earnings

  • Coverage (sectors excluded, if any; type of employees):

2006-2010 includes all sectors

  • Constant or current prices (real or nominal terms): Current

  • Source data (for example administrative data; national accounts or specific survey):

Central Statistics Office Statistical Yearbook 2010 and 2011 (national survey)

http://www.cso.ie/releasespublications/documents/statisticalyearbook/201...

http://www.cso.ie/releasespublications/documents/statisticalyearbook/201...

National Wage Agreements

Towards 2016

http://www.taoiseach.ie/eng/Publications/Publications_Archive/Publications_2006/Towards2016PartnershipAgreement.pdf

Towards 2016 Review and Transitional Agreement 2008-2009

http://www.taoiseach.ie/eng/Publications/Publications_2008/Taoiseach_Rep...

Definition of the labour productivity data: Not applicable

1.3 Please provide for your country the available statistical insights/studies on the following wage-related trends, briefly commenting: the period 2006-2010.

  1. Wage drift: differences between the actual wage increase and the collectively agreed wage increases; Are there also remarkable sector differences in this regard? (cf. the 5 selected sectors)

In the period immediately before the economic crisis in 2008, there was relatively little pay drift, due to stricter enforcement provisions in national wage agreements since 2003 (which made it difficult for unionised firms to pursue claims over and above the national terms) and to a more plentiful supply of workers following the opening of the Irish labour market to the 10 new EU members who joined in 2004 (ESRI economist Alan Barrett estimated in 2009 that wages would have been 7.8% higher without this opening of the labour market). Once the economic crisis began in 2008, the national pay agreement reach in late 2008 was paid by some of the more prosperous companies, but nobody went above it and many companies either did not pay the agreement and froze pay, or instead cut basic pay rather than increasing it. In such circumstances, upward wage drift was not even on the agenda.

  1. Wage inequality or dispersion: differences between highest and lowest wage categories; the % of low-wage workers; Are there also remarkable sector differences in this regard? (cf. the 5 selected sectors)

According to the CSO, the ‘Gini coefficient’ (a measure of the inequality of income distribution) in Ireland was as follows for the period 2006 – 2010:

  • 2006 – 32.4

  • 2007 – 31.7

  • 2008 – 30.7

  • 2009 – 29.3

  • 2010 – 33.9

This would indicate that income inequality fell in the initial period of the economic crisis, up to 2009 but increased substantially in 2010.

The income distribution (measured by the income quintile share ratio) was as follows:

  • 2006 – 5.0

  • 2007 – 4.9

  • 2008 – 4.6

  • 2009 – 4.3

  • 2010 – 5.5

The income quartile share ratio also shows a much greater inequality in income distribution in 2010, increasing from 4.3 in 2009 to 5.5 in 2010.

(http://www.cso.ie/en/media/csoie/releasespublications/documents/silc/2010/prelimsilc_2010.pdf)

Wages vary greatly by sector. In Q4 2009 average weekly earnings broken down by sector was as follows:

  • Industry - €831.70

  • Construction - €754.65

  • Wholesale and retail trade; repair of motor vehicles and motorcycles - €502.42

  • Transportation and storage - €728.52

  • Accommodation and food service activities - €336.81

  • Information and communication - €928.61

  • Financial, insurance and real estate activities - €965.40

  • Professional, scientific and technical activities - €798.72

  • Administrative and support service activities - €502.36

  • Public administration and defence - €1,012.66

  • Education - €860.27

  • Human health and social work activities - €790.40

  • Arts, entertainment, recreation and other service activities - €485.05

This shows that the highest paid sectors were ‘Public administration and defence’ and ‘Financial, insurance and real estate activities’ while ‘Accommodation and food service activities’ was the lowest paid sector.

(http://www.cso.ie/releasespublications/documents/statisticalyearbook/201...)

The number of workers paid at the minimum wage of €8.65 per hour is less than 4% of the total workforce, or about 60,000 people, according to the Minister for Enterprise speaking in the Irish Parliament in 2011. In addition, it is estimated that in April 2011, about 15.3% of the workforce were covered by Joint Labour Committees (JLCs) which set minimum terms and conditions for workers in lower paid sectors such as retail grocery, agriculture, catering, contract cleaning, security and hotels. (See Q 3.2(d) for further details)

(http://www.djei.ie/publications/employment/2011/Report_ERO_REA.pdf)

(JLCs were ruled unconstitutional in July 2011 and new legislation was introduced in December 2011 to reform them and put them on a new statutory footing - IE1107019I).

  1. The use of variable pay and financial participation; Are there also remarkable sector differences in this regard? (cf. the 5 selected sectors)

A survey ‘The changing workplace: A survey of employees’ views and experiences’ of 3,000 employees conducted in 2009 by the Economic and Social Research Institute (ESRI) found that “less than a quarter [24.1%] of workers are employed in workplaces that use performance related pay” and less than 20% (19.2%) of all employees are involved in performance related pay. Men are more likely than women to have performance related pay (23% versus 15%). “Just under 16% of workers are employed in workplaces that offer profit or gain sharing or share options, although less than 12% of all employees themselves receive these types of rewards”.

Use of variable pay in an employee’s workplace by sector
 

Performance related pay

Profit sharing, share options, gain sharing

Manufacturing Industry & Primary Sector

35.5%

28.6%

Construction

17%

8.5%

Wholesale & Retail

21.9%

13.3%

Hotels & Restaurants

13.4%

6.6%

Transport & Communications

25.2%

20.5%

Finance & Bus. Services

49.6%

36.2%

Public Admin & Defence

13.6%

3%

Education

10.4%

0.4%

Health

6.3%

2%

Other Services

15.9%

5.3%

Public Sector

9.9%

1.7%

Private Sector

27.4%

19%

( http://www.esri.ie/UserFiles/publications/jacb201045/BKMNEXT169.pdf)

Block 2: Studies on the relationship with working conditions

2.1.a Please provide information on relevant studies or statistical findings which show how trends in employment creation or destruction explain possible negative wage trends during the current the crisis in the country. Is there for example playing a composition effect: higher paid industry jobs are cut and partly replaced by lower-paid service jobs? Is it a question of shorter working hours, less overtime?

A special analysis by the Central Statistics Office (CSO) of wage bill changes over 12 months at the height of the economic crisis shows that most labour cost savings in Ireland came through reduced headcount, followed by falling hours and then falling average hourly earnings. The CSO ‘Analysis of Wage Bill Change in Enterprises and Components of Change, Quarter 3 2008 to Quarter 3 2009’ looks at the relative importance of three components – employment levels, average working hours and average hourly earnings – in the reduction of wage bills between the third quarter of 2008 and the third quarter of 2009. Since some fluctuation in the wage bill is normal, the analysis focuses on those firms who changed either the wage bill or the three components by more than 2%.Almost two-thirds of all firms (65%) had reduced their wage bill by more than 2% over the 12 months studied, while a quarter (25%) actually increased their wage bill by more than 2%. Cutting the number of employees was the means used by most firms to reduce wage costs, with 66% reducing employment by more than 2% over the year, with just 21% increasing employment by more than 2%. Average weekly paid hours were reduced by more than 2% in 51% of firms, and increased by more than 2% in 31% of firms. Average hourly earnings was the smallest component of wage bill reduction, with 35% of firms reporting decreases of 2% of more, while 47% reported increases of 2% or more.

The hours and earnings figures were standardised to remove – in so far as possible - the compositional effect. An analysis of the compositional effect found that an overall conclusion of an upward compositional distortion, due to more job losses in lower-paid groups, cannot be relied upon where there are compositional effects within occupational groups themselves.

http://www.cso.ie/releasespublications/documents/earnings/2009/wagebillq...

2.1.b If there is no negative wage trend, please provide information on relevant studies or statistical findings which explain why wages in the country did not reacted in a negative way to this economic shock of the current crisis? Are trends in working conditions and employment included in these explanations?

A special paper ‘Wage bill change in Ireland during recession - how have employers reacted to the downturn’ [IE1202029I] by Kieran Walsh, a senior statistician in the CSO which was presented to the Statistical and Social Inquiry Society of Ireland (SSISI) on February 9, 2012 examines how changes in the composition of employment may have impacted on average earnings levels.

Using figures from the CSO ‘Earnings, Hours and Employment Costs Survey’ (EHECS), Mr Walsh found “that the majority of employment loss between Q1 2008 and Q1 2009 was recorded for the ‘Production and other’ group, a group which was particularly prevalent in the construction and industry sectors which accounted for the bulk of employment loss as measured by both EHECS and separately by the Quarterly National Household Survey”.

“The effect of this unbalanced employment loss was that, as measured by EHECS, the managerial group went from 31% of total employment in Q1 2008 to 33% in Q1 2009... This created an expectation that compositional change over the period was keeping average earnings levels higher than would have been the case had the composition of total employment stayed the same.”

Mr Walsh examines the effect of compositional change by comparing the trend in published average hourly earnings to the standardised equivalent.

“In the period Q3 2008 to Q3 2009 the compositional effect was +1% (i.e. the increase in earnings of 2% would only have been 1% if there had been no compositional change). While earnings fell between 2009 and 2010 the compositional effect was the same (+1%). In the case of Q3 2008 to Q3 2009 the positive compositional effect appeared to be most heavily linked to the heavier loss in employment in the private sector than the public sector. This was not the case to any large degree for the subsequent periods so for the comparison between 2009 and 2010 it must be assumed that the compositional effect related to changes in composition across the more detailed sectors. Between 2010 and 2011 no compositional effect was measured.”

2.2 Please provide information on relevant studies or statistical findings (current or from the past) on what effect a change in wages (increase, freeze or cut) has on the working conditions in the country or their outcome (job security, well-being at work and job satisfaction).

The Mercer ‘What’s Working’ survey, conducted between the final quarter 2010 and quarter two 2011 included 1,000 workers in Ireland. The survey attempts to measure the impact on company performance and employee morale of the current crisis.

In Ireland it found dissatisfaction with benefits, pay and job security. The survey finds that “only 47% of Irish workers today” say their benefits are as good as, or better than, those offered by other organisations in their industry, down 24 points from 71% in 2004 - the largest decline in the survey.

Irish employees place the greatest value by far on base pay (relative to other elements of the employment relationship); however, only 46% say they are satisfied with their base pay. Today, far fewer than before: believe they are paid fairly given their performance and contributions to the organisation (53%, down from 62% in 2004); understand how their pay is determined (67%, down from 75% in 2004); and believe the pay in their organisation is as good as, or better than, that of other organisations in their industry (49%, down from 54%).

Slightly more than one in three (35%) Irish workers was seriously considering leaving his or her organisation in 2011, up sharply from 22% in 2004.http://www.mercer.ie/press-releases/insideemployeesminds-1429750

2.3 Please provide information on relevant studies or statistical findings showing a trade-off effect between wages and other working conditions in the crisis. Possible other working conditions are other forms of rewards, job security, working time revisions, changes in work organisation, and training opportunities.

See Question 2.1a - A special analysis by the Central Statistics Office (CSO) of wage bill changes over 12 months at the height of the economic crisis shows that most labour cost savings in Ireland came through reduced headcount, followed by falling hours and then falling average hourly earnings.

2.4 Complementary to question 2.3, we have included in annex data of the EWCS 2010 for your country that compare access to training, feelings of job security and changes in working time for employees that have been experiencing a wage decrease, increase or no change in the year prior to the survey. These data are indicative for possible trade-off effects. Could you please have a brief look to these data and comment?

On the issue of training, those who got training in 2010 were more likely than average to have had a decrease in income. This finding may at first seem surprising, as employers who have had to cut income would also be expected have less resources for training. But this finding may indicate that decreases in income are correlated with major restructuring and change, another part of which may be the need to acquire new skills or upgrade existing skills.

On the job security question, it is striking that just 35% of those who strongly agree that they could lose their jobs have had a decrease in the last 12 months, compared to an average of 48% getting a decrease across all respondents. Similarly, as many as 60% of those who feel least secure have had no change in income, as opposed to an average of 39% across the board. It may be that those who had had a fall in income believe that their employer has now restructured with a better chance of survival, while those with employers that have not undergone change believe they are heading for a deeper fall before long.

On the working hours question, 87% of those who have seen a fall in working hours have also seen a fall in income, as opposed to 48% across the board. Meanwhile, just 36% of those who have seen no change in hours have seen a fall in income, as opposed to 48% across the board. This suggests that for many of those who saw a fall in income, the fall came through lower working hours rather than lower pay rates. However, a significant minority (36%) worked the same hours and still saw their income fall – which could include cuts in shift and overtime premia and other non-basic pay elements as well as cuts in basic pay.

Block 3: Relevant policy practices

3.1 Please identify and describe 3 key company or sector examples where a trade-off has been realised between wages and other features of the employment contractual arrangements during the crisis.

  1. Public Sector

In March 2010 a four-year agreement covering 330,000 public sector workers was negotiated between the Irish Government and public service unions. The agreement was accepted by public sector unions in June 2010 by a majority of almost two to one. Essentially the ‘Public Service Agreement 2010-2014’ commits the Government to no further pay cuts in return for public sector reform.

(http://per.gov.ie/wp-content/uploads/Public_Service_Agreement_2010_-_20141.pdf)

The Agreement includes a four-year pay freeze, a commitment on job security which means the government will not implement compulsory redundancies and the maintenance of existing pension arrangements. The Agreement also states: “There will be no further reductions in the pay rates of serving public servants for the lifetime of this Agreement”.

A key element of the Agreement is a commitment to a programme of major change overseen by an ‘implementation body’ which is to yield cost savings, productivity improvements and efficiencies and guarantee industrial peace in the public sector. The Agreement also commits to large reductions in public service numbers.

The Agreement followed government implemented salary reductions introduced from January 1, 2010 as follows:

  • 5% cut in the first €30,000 of salary;

  • 7.5% reduction in the next €40,000 of salary;

  • 10% cut in the next €55,000 of salary.

Cuts were also introduced in the salaries of senior civil servants and government ministers. These include a 12% cut in salaries of up to €200,000, a 15% reduction in salaries of €200,000 or more, and a 20% cut in the salary of the country’s Prime Minister (Taoiseach).

The pay cuts were opposed by trade unions but were tacitly accepted under the ‘Public Service Agreement 2010-2014’. The Agreement includes the prospect of a limited reversal of the pay reductions, in the event of sufficient savings being identified, with priority given to workers earning an annual amount of €35,000 or less. However, a joint statement by the Government and the Public Services Committee of the ICTU, issued in July stated: “In light of the severe budgetary position, the Government is not in a position to address the effect on pay rates of the Financial Emergency Measures in the Public Interest Acts of 2009 and reducing the effect of the pension levy at this time”.

  1. HORECA sector

Agreement was reached by the Gresham Hotel, Dublin and SIPTU to introduce “rolling short time working” instead of pay cuts. The short time working was introduced to ensure cost savings in order to “secure the future of the Gresham Hotel in the present trading environment”. The cost savings would “secure jobs”.

Short time working was one of two options – the other being a pay reduction - proposed by management and SIPTU following a number of conciliation conferences at the Labour Relations Commission. SIPTU members were presented with the two proposals in a ballot. Over 80% of workers opted for the short-time working plan. This was also the option which had been endorsed by the union.

The proposed pay reductions would have meant a 4% pay cut for workers earning between €21,000 and €30,000; an 8% cut for those earning between €30,000 and €45,000; and a cut of 10% for those earning over €45,000. Employees earning less than €21,000 would have had no pay cut. The short-time working option will result in the same cost savings for the company, but will significantly reduce the hit taken by employees, due to the fact that the workers on short-time will be entitled to social welfare payments. Workers in short-time are entitled to one-fifth of the Job Seekers Benefit rate for each day not worked (Jobseeker's Benefit is a weekly payment from the Department of Social Protection (DSP) to people who are out of work and are covered by social insurance (PRSI)).

The short-time working commenced on January 1, 2011, and was set to continue for a period of 12 months. After December 31, 2011, original terms and conditions of employment are to be fully restored. It was agreed that “all monies saved during the life of the agreement are a permanent saving and will not be returned in any form to the employees in the future”. The parties were to register the agreement with the Labour Court as a legally binding agreement.

Speaking about the agreement, former SIPTU sector organiser, Pat Ward said: “The agreement reached between the Gresham Hotel and SIPTU demonstrates an ability where there is a genuine willingness and transparency on behalf of both the employer, the union and its members to explore in a meaningful way an alternative to a pay cut agenda where significant savings can be delivered.”

  1. Construction sector

A 7.5% pay cut for workers in the construction industry was ratified by Ireland’s Labour Court in January 2011 and applied from February 2011. This came after a recommendation, in June 2010, by a separate division of the court that employers and unions should voluntarily reduce their legally-binding minimum pay rates in the construction industry Registered Employment Agreement by this amount. The Labour Court recommendation was agreed by the sectoral social partners.

REAs are agreed minimum rates of pay and conditions which can be registered with the Labour Court. When registered with the court, these agreements are legally binding, not only on the parties to the agreement but also to others who are in the class, type or group to which the agreements apply.

In addition to the pay cut, stronger compliance rules were also to be brought in. The compliance measures would tighten up adherence to the minimum pay and conditions set out in the Registered Employment Agreement (REA) for the industry. Some on the union side felt that if these measures significantly improve compliance, even at the expense of a 7.5% pay cut, this may be better than what they felt was the low level of compliance with the REA.

The new compliance proposals provide for union officials to have access to a designated member of management on publicly-funded projects, who would be responsible for addressing compliance concerns, after which the issues could be referred to the ‘compliance official’. This would happen before any referral to the Labour Court and/or the Construction Industry Disputes Tribunal (CIDT). Other compliance include the displaying of the REA’s terms on all construction projects and union officials having access to a designated member of management on all projects, after which any unresolved issues would be referred to the Labour Court and/or CIDT. The new REA also states that the question of a clause in the REA “being appropriate and to be agreed in relation to training needs to be seriously explored”.

3.2 Please identify policies recently put in place to support vulnerable groups of workers who have been possibly most affected by the recent wage trends. Priority should be given to policies and measures put in place to support low-wage workers, working poor and women. Additional attention could be paid to young workers, elderly workers and migrant workers.

  1. Pay increases under National Agreements

The last two Social Partnership national wage agreements, negotiated in 2006 and 2008 (prior to the current economic crisis) contained extra pay increases for low paid workers. Under the Towards 2016 agreement, public sector workers earning up to and including €400 per week (€20,859 per annum) and private sector workers earning an hourly basic rate of €10.25 per hour or less received an extra 0.5% increase. Under the Transitional Agreement, public sector workers earning up to and including €430.49 per week (€22,463 per annum) and private sector workers earning an hourly basic rate of €11 or less were due to receive an extra 0.5% pay increase. (However, the terms of this Agreement were not implemented in the public sector and were only implemented by a minority of private sector employers).

  1. Reversal of cut to statutory minimum wage

In 2011, the Fine Gael / Labour coalition Government reversed the cut to the minimum wage which was implemented by the previous Fianna Fail / Green Government. The minimum wage cut of €1 per hour had been implemented by the outgoing Government with effect from February 1, 2011. The reversal of the minimum wage cut had been a key election pledge by both Fine Gael and Labour. The Social Welfare and Pensions Bill 2011, published in June 2011, reversed the €1 per hour cut with effect for July 1, 2011.

  1. Public Service agreement pay cut restoration

The Agreement includes the prospect of a limited reversal of public sector pay reductions, in the event of sufficient savings being identified, with priority given to workers earning an annual amount of €35,000 or less. However, a joint statement by the Government and the Public Services Committee of the ICTU, issued in July stated: “In light of the severe budgetary position, the Government is not in a position to address the effect on pay rates of the Financial Emergency Measures in the Public Interest Acts of 2009 and reducing the effect of the pension levy at this time”.

  1. New Legislation on Joint Labour Committees (JLCs)

In July 2011 Joint Labour Committees (JLCs) were ruled unconstitutional by the High Court and the ruling struck down existing Employment Regulation Orders (EROs) which set down minimum pay rates and terms and conditions in certain low-paid sectors.

JLCs are independent bodies which determine minimum rates of pay and conditions of work for workers in certain sectors. Each JLC is composed of representatives of workers and employers in the sector concerned. The pay and conditions agreed by the representatives on the JLCs are given force of law in Employment Regulation Orders (EROs). JLCs cover mainly low-paid sectors such as hotels, catering, cleaning, agriculture and retail grocery. Up to July 2011, it was estimated that about 15.3% of the workforce were covered by JLCs. (http://www.djei.ie/publications/employment/2011/Report_ERO_REA.pdf)

The Government had been in the process of reviewing JLCs with a view to introducing reforms. The Minister for Jobs, Enterprise and Innovation, Richard Bruton published the Industrial Relations (Amendment) (No. 3) Bill 2011 in December 2011 to implement reforms to the JLCs. According to a statement by the Department: “The Bill, when enacted, will implement the programme of reforms to the JLC/REA systems agreed by Government in July. It will radically overhaul the system so as to make it fairer and more responsive to changing economic circumstances and labour market conditions. It will also reinstate a robust system of protection for workers in these sectors in the aftermath of the High Court ruling”.

Minister Bruton said: “From the beginning of this process I have been determined to strike a balance between protecting vulnerable workers and providing reforms that would make the systems more competitive and more flexible so as to allow for the creation of jobs in these sectors. Over the course of the drafting process, we managed to include changes to ensure that the new flexibilities would not be open to abuse. At this difficult time it is important to strike a balance between creating new opportunities for employment and providing protection for vulnerable workers”.

Commentary by the NC

While a general impression has been created by domestic and international media coverage that the Irish labour market has responded to the economic crisis by cutting wages across the board, the real picture is more complex. While cuts in basic pay rates – unheard of in recent decades – have been a reality for the public service and a significant minority of the private sector, the majority of private sector employers have been freezing pay, with a tiny minority having moderate pay increases. This is not to say that labour costs have not been reduced, but much of this has been done through massive redundancies, cuts in overtime, shift another non-basic earnings and the hiring of any new entrants at significantly reduced pay rates. Cuts in the basic pay of incumbent workers has been the most novel response of employers to the crisis and hence the most eye-catching, but much of the undoubted fall in labour costs have been through the more traditional methods cited above.

Roisin Farrelly and Colman Higgins, IRN Publishing

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