1997 Annual Review for Ireland

This record reviews 1997's main developments in industrial relations in Ireland.


The Irish economy has performed exceptionally well in recent years, with annual GNP growth averaging 6%-7% between 1994 and 1996 and standing at 6.6% in 1997, according to Eurostat figures. This has resulted in increased prosperity and living standards, and these trends are forecast to continue over the short to medium term. Inflation averaged 2.2% over 1994-6, and is expected to remain at around 2% in the foreseeable future (Eurostat puts the 1997 figure at 1.2%). The General Government Deficit was reduced from 2.2 % of GDP in 1993 to around 1.5% in 1996 - Eurostat estimates a public surplus of 0.9% of GDP in 1997 - while the debt/GDP ratio fell from 94% in 1993 to 76% at the end of 1996 - 66.3% in 1997, according to Eurostat. The strong performance of the economy has resulted in significant employment growth. Indeed, total employment increased by an average of over 45,000 per year between 1993 and 1996, while the unemployment rate declined from almost 17% in 1993 to just under 13% in 1996 and (according to Eurostat) 10.2% in 1997.

The most significant employment trends have been: the substantial rise in the number of women in employment; the significant growth in manufacturing employment, in the main due to inward investment, but also in indigenous industry; a sustained increase in service sector employment; and a significant expansion in part-time working and self-employment. Part-time work accounted for all of the net increase in employment between 1983 and 1993 and the numbers in full-time employment actually declined over this period. The expansion of employment since 1993, however, has mainly involved full-time jobs.

A new centre-right coalition Government, with Fianna Fail as the senior partner to the Progressive Democrats, came to power in the June 1997 general election (IE9707223F), replacing the former "rainbow" coalition of Fine Gael, the Labour Party and the Democratic Left.

Key trends in collective bargaining and industrial action

Since 1987, nationally negotiated intersectoral wage agreements have been a significant factor underpinning the growth in output and employment that has characterised the Irish economy in recent times. The year 1997 began with agreement on the fourth national pact since 1987, Partnership 2000 (P2000) (IE9702103F). P2000 encompasses a broader range of economic and social policies than its predecessors, and new participants, especially those representing marginalised or disadvantaged groups, have entered the consultative process. P2000's pay provisions provide roughly the same increase of 9.25% over three years for private and public sector employees. The main difference between private and public sectors relates to the phasing of the increases and the "local bargaining element" worth 2%.

Evidence to date would suggest that most employers in the private and semi-state sectors have abided by the terms of national agreements (IE9703201F). However, a notable element of some recent workplace agreements is that some employers have secured "concessions" from employees in terms of implementing wage freezes, wage cuts and new working practices. While such agreements may be confined to a small number of companies, in relative terms they are significant in that the precedent of concession bargaining has been established in the Irish workplace. Another significant feature of recent negotiations is the presence of "pockets" of companies - most notably in the pharmaceutical and chemical sector - which have paid wage increases above the terms of the national agreement. Indeed, some recent evidence seems to point to a degree of wage drift in the Irish economy, particularly in companies operating in tight labour markets. However, it is equally likely that while the pay of specific groups of workers may be on the increase, deals on a plant-by-plant basis appear to be largely conforming to the terms of Partnership 2000 (IE9707223F). The key issue is whether local pay settlements will have any knock-on effects, as they had in the 1980s, or whether they are related to the circumstances which pertain in a particular firm or enterprise. The evidence to date would suggest that there has been no wider pattern of wage drift in the economy.

The new Government is committed to introducing a national minimum wage (IE9707223F). The trade unions have campaigned vociferously for a minimum wage of IRL 5.00 an hour (64% of average male earnings for a 39-hour week) (IE9710232N), while employers are generally opposed to its introduction. Indeed, there was a great deal of debate amongst the social partners in 1997 over what level the wage should be set at and how it should operate in practice.

Industrial disputes remained thin on the ground during 1997 (IE9803245N). One example of industrial unrest that attracted considerable attention during the year was the Irish Life (financial services) dispute, in which sales staff resisted fundamental changes in how their work was performed. Other than this, the nurses' pay dispute in February (IE9702104N), and the Ryanair airline dispute over union recognition which broke out at the end of the year (IE9801239N), there were no other significant disputes.

Industrial relations, employment creation and new forms of work organisation

The Irish Government has sought to shift the balance of labour market policy from passive to active measures, which attempt to tackle unemployment directly - for example through general and skills training, employment subsidies, direct employment schemes, and so-called area-based partnerships. Irish expenditure on active labour market policies (as % of GDP) is one of the highest amongst OECD countries. Active labour market programmes have continued to expand, and will need to continue to do so in order to deal with the growth of long-term unemployment, youth unemployment and the influx of women into the labour market. Evidence relating to the effectiveness of such programmes suggests that market-oriented measures, such as training in specific skills designed to meet the needs of employers, together with private sector employment subsidies, are more likely to improve the long-term employment prospects of their participants (see the Irish Labour Market Study, J Sexton and P O'Connell (eds), 1996 - IE9703201F)

An innovative, localised approach to tackling long-term unemployment and social exclusion was introduced in the early 1990s as part of the national agreement, the 1991-3 Programme for Economic and Social Progress (PESP). This involved the creation of 38 urban and rural local area-based partnerships charged with tackling issues relating to social exclusion in a decentralised and participative manner. Local area-based partnerships are tripartite bodies whose primary role is to assist unemployed workers to secure employment and generally to encourage local employment initiatives. Their boards are comprised of representatives from local community groups, representatives from employer organisations and trade unions, and local or regional representatives of the national social welfare, training, or economic development administrations. The partnerships have enjoyed an increasing influence over the activities and expenditures of Government agencies in their particular area.

These measures to tackle unemployment have involved a great deal of input from the social partners. For instance, under the current national agreement, Partnership 2000, the social partners have had an influence over issues such as personal taxation policy, measures to promote employment, anti-poverty measures, public service provision and equality issues. This reflects the attempts to secure a national consensus by providing the social partners with a role in the management of social and economic policy in return for wage moderation. This corporatist-type approach to macroeconomic management has been a significant factor promoting the improvement in the competitive performance of the Irish economy.

There is a general consensus that Ireland should not attempt to replicate the US/UK approach to labour market flexibility. Rather, many commentators have argued that the best way to secure a strong national competitive advantage is to try and develop a high-wage, high-skill, high-innovation economy with adequate social protection.

Reflecting these considerations, Partnership 2000 sets out a national framework for extending partnership to the level of the workplace. The national agreement, however, does not impose any one model of partnership - a recognition of the fact that there are different competitive pressures facing individual companies. P2000 states that: "A big challenge for companies and unions will be to move in a positive way from the traditional approach to the organisation of work to more flexible and fluid work practices. Our ability to manage change, to strike a balance between flexibility and security and to develop a high-trust environment between employees and managers will be crucial."

P2000 sets out a number of issues for discussion with regard to the development of partnership at workplace level, including: training and development; employee involvement; representation arrangements; the composition of the workforce (issues relating to the employment of "atypical" workers taking account of such factors as competitive pressures, flexibility and security of employment); cooperation with change, including new forms of work organisation; adaptability, flexibility and innovation (the means by which the organisation can be made more flexible, innovative and adapt to changing market requirements) .

Ireland has introduced new legislation on new forms of work and working time organisation in order to comply with European initiatives.

The Organisation of Working Time Act, 1997, was introduced in order to comply with the EU Directive on the issue (93/104/EC). It establishes statutory rights for employees with regard to the maximum average length of the working week (48 hours), the periods over which it may be averaged, minimum rest periods, breaks and holidays. The Act provides employer and employee representatives with the freedom to negotiate local collective agreements in order to allow alternative average hours for the working week and/or alternative rest periods. It allows for the gradual introduction of the 48-hour working week during the first two years of its operation. This permits a 60-hour maximum average working week in the first year and a 55-hour week in the second year. These agreements are subject to ratification by the Labour Court.

The Government has also introduced, or is committed to introducing, legislation supporting flexible "family-friendly" policies, in order to comply with the various European framework agreements/Directives. For instance, Partnership 2000 contains a government commitment to give effect to the terms of the parental leave Directive (96/34/EC) by June 1998, and to consult with the social partners. The Employment Equality Agency has stressed that "family-friendly" policies such as parental leave can benefit both employers and employees and can result in a "win-win" situation.

Developments in representation and the role of the social partners

The issue of workplace social partnership has become a subject of intense debate. There is a belief, particularly amongst trade unionists, that, without the wider diffusion, and acceptance by employers of workplace partnership arrangements, support for centralised bargaining amongst employees and their representatives will quickly dissipate. The challenge facing the social partners is to develop models of local partnership which will reflect the diversity of the Irish industrial relations system, and the different competitive pressures facing individual companies. To this end, a National Centre for Partnership was established in July 1997 in order to promote and facilitate the development of local level partnership between employers, employees and unions (IE9706202N). Its functions include: promoting involvement and partnership; monitoring developments; providing technical assistance and support to organisations in developing involvement and partnership arrangements; and disseminating "best practice".

The European Works Council (EWC) Directive is likely to have an important impact on Irish industrial relations in the future. In 1996, the Government introduced the Transnational Information and Consultation Act to comply with the terms of the Directive. The Act affects, or will eventually affect, approximately 200 multinational subsidiaries in Ireland, as well as a small number of Irish-owned companies such as Aer Lingus, CRH, and Greencore. Distinctive features of the Act include a provision for trade union officials to act as nominees (whether appointed or elected) or advisers to the special negotiating body if requested by the workforce - trade unions have thus been bestowed an important role which is not contained in the original Directive. However, the Act does state that while union representatives may be elected or appointed as employee representatives to the initial special negotiating body, only employees of the company concerned are entitled to sit on the statutory EWC based on the Directive's subsidiary requirements.

A high-level group was established by the social partners to examine the thorny issue of trade union recognition and report by the end of 1997 (IE9802141F). This was an obligation entered into by the parties under Partnership 2000. (Draft proposals were presented in early 1998, advocating that union recognition should be dealt with through the existing voluntarist collective bargaining system rather than through any requirement for mandatory recognition, with an expanded role for the state's dispute resolution bodies, whose final recommendations should be non-binding (IE9803114F). However, the proposals are likely to face a great deal of criticism from trade unions, as they do not come close to the sort of mandatory recognition rights called for by many trade unionists. Employers are generally strongly opposed to mandatory recognition. An example of employer hostility to union recognition that has attracted a considerable amount of attention from all quarters is Ryanair's refusal to grant recognition rights to its baggage handlers (IE9803224N). It is also widely held in the state's development agencies and in government departments that procedures for mandatory recognition would endanger Ireland's ability to attract inward investment. Ireland has been enormously successful in enticing US electronics companies, many of which have chosen to remain non-union.)

Industrial relations and the impact of EMU

There has been limited debate over the possible impact of EMU on Irish industrial relations. For many commentators, the critical issue relates to Irish competitiveness in relation to the UK. Within Partnership 2000, it is advocated that "in the context of Irish membership and possible UK non-membership of EMU and the possible occurrence of a depreciation of Sterling", a number of measures contained in the 1996 National Economic and Social Council (NESC) report, Strategy into the 21st Century: Conclusions and recommendations - which laid down the framework for Partnership 2000 (IE9801109F) - should be in place, including: "coordinated wage bargaining in the context of a negotiated social partnership programme; continuous efforts to strengthen the underlying competitiveness of the Irish economy; and a further reduction in the non-wage costs of labour, through reform of tax and PRSI [social security contributions]".

However, it can be argued that the Government and the social partners have paid insufficient attention to devising policies to deal with the likely demands that EMU will create in terms of the requirement to become increasingly flexible. This issue was not widely addressed within Partnership 2000. It is possible that the lack of urgency in preparing for EMU could mean that jobs will be at risk. An obvious danger is that a large number of jobs could be lost if Sterling depreciates sharply.

Conclusions and outlook

Industrial relations and policy-making in Ireland in 1997 were very much shaped by the provisions of the P2000 agreement, with an emphasis on local and workplace partnerships and action to achieve a more highly-skilled and flexible workforce. Discussions in 1998 are set to focus on the issue of entry into EMU, trade union recognition and employee representation at the workplace.

(Tony Dobbins, UCD, John Geary, UCD, Brian Sheehan, IRN)

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