1998 Annual Review for Ireland

This record reviews 1998's main developments in industrial relations in Ireland

Introduction

The Irish economy has performed exceptionally well in recent years, with GDP growth averaging some 7% in the 1990s, and standing at 9.8% in 1997 and 9.5% in 1998 (according to Department of Finance 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% between 1994 and 1997, and stood at 2.4% in 1998. The state budget showed a surplus in 1997 and 1998, when it was approximately 2% of GDP. The debt/GDP ratio fell from 94% in 1993 to an estimated 52% at the end of 1998. The strong performance of the economy has resulted in significant employment growth. Total employment increased by an average of over 45,000 per year between 1993 and 1996, and grew by 95,000 in the year to March-May 1998. Unemployment declined from almost 17 % in 1993 to 7.1% in December 1998 (ILO definition).

The most significant changes in employment trends have been: a substantial rise in the number of women in employment; a 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.

The transformation in the fortunes of the Irish economy outlined above has meant that the context in which national agreements have been negotiated (see below) has changed from one of "managing crisis" to "managing growth" at a time of rising expectations. The context of strong economic growth has generated a number of pressures such as disputes over public sector pay, a degree of wage drift, skill and labour shortages, and disagreements over trade union recognition.

At the present time, the government consists of a coalition between the centrist Fianna Fail party and the small right-of-centre party, the Progressive Democrats (PD s). The coalition has been in power since June 1997

Key trends in collective bargaining and industrial action

Collective bargaining is currently governed by Partnership 2000, the fourth successive national intersectoral agreement to have been concluded since 1987. Signed in 1997, P2000 provides for roughly the same pay increase of 9.25% over three years for both 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. However, some recent evidence seems to point to a degree of wage drift in the Irish economy, with a number of companies operating in specific sectors paying wage increases above the terms of the national agreement guidelines. This is particularly evident among companies operating in tight labour markets and competing to attract and retain skilled workers, most notably in the pharmaceutical and chemical sectors, electronics, software and construction. Nevertheless, while the pay of specific groups of workers in such sectors may be on the increase, deals on a plant-by-plant basis appear to be largely conforming to the terms of P2000. An October 1998 Industrial Relations News (IRN) survey of over 780 pay settlements showed that while there had been greater wage drift than under earlier national agreements, the overall level of adherence (almost 89%) to the basic terms of P2000 remained strong (IE9810262N). Meanwhile, Central Statistics Office (CSO) figures for industrial earnings figures up to June 1998 showed considerable pay drift, with an estimated average increase of 6.8% in hourly earnings. The CSO data may also indicate that non-union firms are paying somewhat above the norm. CSO findings are broadly confirmed by a recent CUD survey, Irish management practice in the changing marketplace (1996/7), which also found that non-union firms are likely to pay "above the odds".

In sum, there has been no widespread pattern of wage drift in the Irish economy. Rather, the key to understanding private sector pay pressures is that they are generally due to labour and/or skill shortages in specific sectors, as well as being related to productivity/profit/performance-related criteria in particular firms in the context of economic growth.

With regard to industrial disputes, 1998 saw growing anxiety over pay pressures that have developed amongst key public sector groups such as the police, nurses, teachers and fire fighters in recent years. It was the most volatile year in the public sector for almost a decade in terms of the number of serious disputes, with the police (IE9808256N), train drivers (IE9812267N) and nurses threatening to take industrial action or doing so. These events put the government's public sector pay policy under serious pressure. At the end of the year, the Labour Court's recommendation on the nurses pay claim, for example, was awaited with some interest and trepidation because of the perception that it could precipitate "knock-on" or "catch-up" wage claims from other public sector groups. In view of the importance attached to reforming public service pay, the Prime Minister asked the National Economic and Social Council (NESC) to help resolve the crisis by examining the relationship between public service pay and performance, as part of its forthcoming three-year strategy report on the Irish economy (IE9812266F).

A single statutory national minimum wage is set to be introduced by 2000, following the publication in April 1998 of a report by the National Minimum Wage Commission (IE9804246F). The proposed hourly rate of IEP 4.40 per hour was largely welcomed by the Irish Congress of Trade Unions (ICTU) but was heavily opposed by all employer groups.

The 1999 state Budget, issued in December 1998 (IE9901134N), went some way towards addressing the issue of low pay by substantially increasing personal tax-free allowances and taking many low-paid workers out of the tax net entirely. It met with a warm response from trade unions and employers. It is likely that it will have done no harm in increasing the likelihood that there will be a new national agreement to succeed P2000

However, the Budget will have little impact on public service disputes and pay claims or the thorny issue of trade union recognition (see below), which are currently among the main obstacles to a new national agreement.

Before negotiations on a new national agreement commence, the government will have to address the obstacles mentioned above, which are major trade union concerns. Despite this, the debate on what is to succeed P2000 has already begun within the trade union movement. According to ICTU's general secretary, Peter Cassells, the debate has emanated from a realisation that the current type of national agreement is too inflexible to meet the demands of a modern booming economy.

It is likely that negotiations on a successor to P2000 will be very different to previous negotiations. Mr Cassells argues that it is time to review big issues such as low pay and social exclusion in the context of the current climate of unparalleled economic growth. He believes that the new agenda should include a more equitable sharing of the benefits of growth, not just by rewarding employees for participating in workplace change, but also by establishing a "social wage" that guarantees a minimum standard of income for everyone. He suggests that trade unions must be willing to look at a number of options. At one end of the spectrum, these options include: another standard national agreement; one with a strong overall framework that facilitates greater flexibility for local bargaining; or one with a looser framework that contains general pay negotiation guidelines. At the other end of the spectrum, there could be sectoral pay bargaining, while in extreme circumstances, there could be a return to "free for all" collective bargaining.

However, Mr Cassells does not see either of the two extremes, a continuation of existing standard agreements or a return to "free for all" bargaining, as being viable options. He also believes that the scope for further tax concessions is almost gone, unless people are prepared to accept a serious deterioration in public services. He argues that alternative solutions must be found, including promoting the idea of the rights of employees as "stakeholders", especially in a climate when companies increasingly expect and depend on employees to become more and more flexible.

Industrial relations, employment creation and work organisation

Many of Ireland's employment creation measures involve a great deal of input from the social partners. Passive measures, relating principally to the provision of financial support for unemployed people, have increasingly been superseded by a range of active labour market policies which attempt to tackle unemployment directly. These have included general and skills training, employment subsidies, direct employment schemes, and area-based partnerships.

Area-based partnerships were introduced in the early 1990s, with 38 such urban and rural local partnerships set up to tackle issues relating to social exclusion in a decentralised and participative manner. The partnerships are tripartite bodies whose primary role is to assist unemployed workers to secure employment and to encourage local employment initiatives. Their boards are comprised of representatives from local community groups, employer organisations and trade unions, and local or regional representatives of the national social welfare, training, or economic development administrations. The evidence suggests that the partnerships have been a particularly successful and relatively inexpensive means of tackling long-term unemployment in disadvantaged areas.

In line with the EU Employment Guidelines, the government unveiled Ireland's National Action Plan (NAP) on 20 April 1998 (IE9805116F). The key objective of the plan was to reduce unemployment from 9.4% to 7% by 2000. In fact, this target was already nearly reached in 1998, with unemployment standing at 7.1%. Many of the measures contained in the plan are also commitments contained in P2000.

The first part of the NAP places an important emphasis on tackling youth unemployment. The Training and Employment Authority (Foras Áiseanna Saothair, FÁS) and local employment services will be instructed to contact all persons aged under 25 who have been on the "live" unemployed register for more than six months with a view to providing them with a job, training or other employment support. This approach is intended to prevent "welfare dependency" amongst young people. Measures to improve employability will also involve a continuing transition from passive to active labour market measures. A key issue set out in the Plan is improving the "level of access for the long-term unemployed to mainstream training".

The second part of the NAP contains measures to improve the operating environment for small businesses as well as measures to promote self-employment. Measures are outlined to explore the potential of the "social economy" at a local level in terms of sustainable job creation. In addition, there is a commitment to make the tax system more "employment-friendly".

Part three of the Plan places a significant emphasis on promoting partnership at the enterprise level (see below) and also contains measures to support "adaptability" in enterprises, particularly in terms of increasing investment in skills and training. Finally, part four contains measures to enhance equal opportunities and reconcile work and family life by promoting measures such as better childcare provisions.

Within the context of P2000, the government was committed to consulting with the social partners over the NAP. During the drafting of the plan, the views of the partners were taken into account and a number of amendments were agreed. There are plans for continuing consultation, as well as a progress report. However, the general reaction of the social partners to the finished plan was that it was primarily a repackaging of existing policies with little significantly new being added.

In 1997 and 1998, the Irish government introduced a series of legislative measures in order to meet the requirements laid down by EU Directives. In 1997, the government introduced the Organisation of Working Time Act to implement the working time Directive (93/104/EC), and by October 1998, 109 collective agreements and notices on working time, providing alternative arrangements to those in the Act, had been registered with the Labour Court (IE9810263N). The Parental Leave Act, transposing Directive 96/34/EC, came into force on 3 December 1998 (IE9806251N).

Developments in representation and role of the social partners

P2000 sets out a national framework for extending social partnership to the level of the workplace, though without recommending any one model of partnership - a recognition of the fact that there are different competitive pressures facing individual companies. The agreement sets out a number of issues for discussion with regard to this issue, including training and development and new forms of work organisation. An important emphasis is placed on the need to "strike a balance between flexibility and security". The issue of workplace social partnership became a subject of intense debate in 1998. 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 could quickly dissipate. The challenge facing the social partners is to develop models of local partnership which reflect the diversity of the Irish industrial relations system.

There was an increase in the extent of workplace partnership initiatives in 1998, and by November IRN had reported around 20 company agreements on the subject (IE9811264N). However, research published in 1998 ("Workplace partnership and employee involvement in Irish workplaces", William K Roche and John F Geary, CEROP Working Paper No. 26, Graduate School of Business, University College Dublin, 1998) suggested that such arrangements are still rare in Ireland, and that unilateral management prerogative is the predominant means of handling workplace change.

The European Works Council (EWC) Directive was transposed into Irish law through the Transnational Information and Consultation Act 1996. Approximately 271 operations located in Ireland (both Irish- and foreign-owned) are currently affected by the Directive. However, it is estimated that this will increase to about 550 when the Directive extending the legislation to the UK comes into force on 15 December 1999.

The absence of a statutory trade union recognition mechanism remains a matter of concern to ICTU. In fact, the issue has become increasingly contentious. Unions are finding it increasingly difficult to recruit and retain members. They face two main problems. First, multinational companies, particularly those of US origin in the electronics sector, have been unwilling to recognise trade unions and have made it clear that any statutory recognition measures would be unacceptable to them. Second, unions have also had to face increased resistance to recognition from some indigenous employers. An example of this was 1998's bitter dispute at the Ryanair airline, involving baggage handlers, over the company's refusal to recognise the Services, Industrial, Professional and Technical Union (SIPTU).

The Government set up a high-level expert group under P2000 to deal with the thorny issue of union recognition. The group advocated that union recognition should be dealt with through the existing voluntarist system, rather than through any statutory requirement for mandatory recognition (IE9802141F). It proposed that the state's dispute resolution bodies should have an expanded role, embracing the involvement of the advisory service of the Labour Relations Commission, a "cooling-off" period for intractable disputes and, perhaps, a final non-binding recommendation from the Labour Court. However, the Ryanair dispute severely tested this voluntarist formula and, to some degree at least, reduced the possibility that it would be acceptable across the trade union movement (IE9803114F). By the end of 1998, ICTU had made its final submission to a reconvened high-level group, and was calling for mandatory employer acceptance of Labour Court recommendations and attendance at Court hearings. However, ICTU also indicated that it would be prepared to agree limits on the rights of unions to strike in essential services, a key employer demand for many years.

Industrial relations and the impact of EMU

One of the primary goals of P2000 was to ensure that the criteria for EMU membership were met. Paragraph 2.1 of the agreement states that "this partnership is predicated and dependent on continued strong growth in the Irish economy. Fundamental to its successful implementation and the benefits it will bring to our economy and society, is the management of our public finances in accordance with the Maastricht criteria, and the EU Stability and Growth Pact."

Ireland was well placed to qualify for EMU. The national debt had been significantly reduced, the government budget deficit turned into a surplus and inflation was low. However, a tight balance has had to be struck between adhering to the strict fiscal constraints required for EMU qualification and funding initiatives to tackle Ireland's social problems, such as long-term unemployment.

There has been some 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. P2000 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 NESC report which formed a basis for the P2000 talks (Strategy into the 21st century) should be in place. These measures include: "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]".

The Economic and Social Research Institute (ESRI) has warned of the dangers of a rapid loss of competitiveness in the Irish economy through excessive pay settlements that are above those in other countries within the euro zone. It is suggested that the underlying problem is to reduce excessive wage expectations on the part of large sections of the workforce in a context of strong economic growth.

Conclusions and outlook

The Irish economy has continued to grow strongly in 1998 and the social partners responded positively to the 1999 Budget. In addition, the way appears open for negotiations on a new agreement to succeed P2000. However, in the meantime, difficult issues such as public service pay, trade union recognition and the minimum wage will have to be tackled if new negotiations are to commence. The crisis surrounding public service pay, in particular, is an issue that the government will have to address. (Tony Dobbins, UCD, and Brian Sheehan, IRN)