Unions raise stakes over compensation for inflation in national pay deal

In October 2000, a series of social partner talks, aimed at addressing Ireland's surge in inflation above nationally-agreed pay increases, assumed new urgency after trade unions began to demand compensatory pay increases rather than just tax concessions.

The debate on how workers should be compensated for 2000's sudden rise in inflation to 6.2% (IE0005151F) took a new twist in late September when the Services Industrial Professional Technical Union (SIPTU ) and IMPACT– two of the strongest trade union supporters of national pay deals – said that they would seek the addition of extra pay increases to the 15% three-year national pay agreement, the Programme for Prosperity and Fairness (PPF) (IE0003149F), agreed in February 2000.

SIPTU, the country's largest union, said it was seeking a 5% improvement in living standards over and above the 15% laid down by the PPF. This could come through a combination of pay increases and tax concessions. IMPACT, one of largest public sector unions and a solid supporter of national deals, said that it was specifically seeking an additional pay increase, but did not identify a precise figure.

The unions met the government early in October 2000 and were to meet the employers soon after, in what may be the first round in a series of talks in the run-up to the national budget in December.

The unions had been careful up to now not to ask for changes in the central pay terms of the PPF, since this would undermine the certainty that such agreements provide. This is a key reason for employer participation in the national deals –a point which the Irish Business and Employers Confederation (IBEC) has noted strongly in recent weeks. Indeed, some of the unions themselves are still leaving open the option that the issue can be resolved without resort to straight pay increases, which could lead to a wage/inflation spiral typical of the pre-national deal era before 1987.

SIPTU has evolved its "pension bond" proposal of several months ago (IE0009220N) to a "savings bond". Pay increases and tax reductions would be paid into this bond for each individual, which would be cashable after a period of time, or if inflation fell below 4% (with immediate encashment possible for those on low disposable incomes).

Employers may be unwilling to fund extra pay increases, but the government could conceivably force them to pay their share through increased employer social insurance contributions. However, the Department of Finance is understood to be unenthusiastic about the proposal.

The fact that the new PPF national deal was negotiated on the assumption that inflation would be 3% for the years 2000-2 has also been cited by the unions as a justification for an effective renegotiation, arguing that the terms no longer apply with inflation likely to average 4%-5% over the same period.