Adherence to national pact can ensure economic success, says report

The best way to avert inflationary pay settlements is through strict adherence by the Ireland's social partners to the terms of the three-year Partnership 2000 agreement, a key element of which involves the Government honouring, in full, all remaining tax commitments in the pact, according to a July 1997 report from the Dublin-basedEconomic and Social Research Institute (ESRI).

In its July 1997 Quarterly Economic Commentary, Ireland's independent Economic and Social Research Institute (ESRI), insists that inflationary pay settlements can be avoided if the social partners maintain strict adherence to the terms of the current three-year national agreement, Partnership 2000, which commenced in January 1997 (IE9702103F). The ESRI believes that central to this achievement must be the Government's willingness to meet all tax-relief commitments entered into in the agreement.

This means that the new Government must come up with tax relief worth a combined IEP 600 million in the next two Budgets in order to meet the overall Partnership 2000 commitment of IEP I billion in tax cuts. Around IEP 400 million in tax reductions have already been implemented following the Budget in January of this year.

The ESRI's commentary says that the consensus approach to pay determination over the past decade has yielded large benefits, in particular, the spectacular rise in employment. Making sure that this approach survives under Partnership 2000 is the most effective method of preserving the competitiveness on which the future growth of jobs depends, it says.

ESRI notes that wage moderation, "born of desperation at the gloomy employment prospects of the late 1980s", has been sustained by a trade-off against falling effective rates of personnel tax, and by a high level of labour availability resulting from demographic trends, a reversal of emigration, rising female participation and a rate of unemployment, which, although falling, is still high by historical standards.

The report suggests that there can be little doubt that the incorporation of pay-tax trade-offs in a series of agreements since 1987 has been beneficial in achieving results in an atmosphere of relative industrial peace "and with a fair degree of cooperation in restructuring and improving flexibility".