Council seeks 'back to basics' approach in new national agreement

In November 2002, two reports from Ireland's National Competitiveness Council, a body on which the social partners are represented, provided further backing for moderate wage increases in any new national social partnership agreement.

Talks on a new national agreement to replace Ireland's current three-year partnership agreement, the Programme for Prosperity and Fairness (IE0003149F) are set to start in late 2002 (IE0210202N). In this context, the National Competitiveness Council (NCC) has added its voice to growing calls for a return to the type of behaviour and actions that underpinned the success of the Irish economy in recent years. According to the NCC, the 'bedrock' of that success has been 'sustainable, moderate wage growth, low inflation, productivity gains, social partnership and a competitive business environment'. These observations come in two NCC reports, theAnnual competitiveness report and the Competitiveness challenge 2002, both of which were published in November 2002.

The NCC was set up by the government in 1997, under the terms of the Partnership 2000 national agreement (IE9702103F). It reports to the government on key competitiveness issues for the Irish economy, and provides policy recommendations aimed at enhancing the country's competitive position. The Council is made up of representatives of trade unions, employers' organisations, companies and state agencies.

In its new reports, the Council states its belief that, in the current more difficult circumstances facing the Irish economy, social partnership can provide the stability and leadership needed. Beyond the core issues of pay, tax and social elements, the process has made an 'enormous national contribution in terms of policy formation and review and through providing an inclusive, national forum focused on addressing issues of socio-economic development in a problem solving context'.

If social partnership is to remain relevant, however, it will be important to link pay, productivity, performance and national competitiveness in innovative ways, the NCC says. In this regard the council welcomes the establishment in 2001 of the National Centre for Partnership and Performance (NCPP) (IE0104166F)

The Council found that wage growth in Ireland is now running ahead of major competitors, 'with a risk of further divergence over the coming years'. Nominal wage costs are continuing to rise rapidly - at around three times the EU average. EU data in the Council’s Annual competitiveness report estimates that average Irish nominal wage increases for full-time employees in 2001 were 3.6% above the average in the 12 'euro-zone' countries.

The NCC warns that, while gains in labour productivity in Ireland in the past justified significant growth in incomes and wages, recent falls in productivity trends 'suggests that wage inflation will have to ease if low unemployment and competitiveness are to be sustained'. However, the Council observes that wage growth is already slowing in response to economic conditions.

Productivity growth averaged close to 3% a year in the period 1990-5, before accelerating to around 4% in the 1996-2001 period. Strong productivity gains across a limited number of multinational manufacturing industries with higher levels of foreign direct investment were the main driver in quickening productivity growth over the past five years, the Council says.

Almost all the growth in employment (33,500) in the year to the second quarter of 2002 was accounted for by the public sector. 'There is a need to translate the growth in employment in the public sector into improved service delivery in terms of policy making, delivery of infrastructure and better regulation,' the Council warns.

On the report of the Public Service Benchmarking Body (PSSB), issued in July 2002 (IE0207203N), the Council observes that this exercise, which assessed public sector pay by reference to the private sector, was undertaken within the overall agreed commitment to public service 'modernisation, including ongoing cooperation with change'. In this regard, the Council points out that the benchmarking report states specifically that it was 'accepted that change is a requirement of a modern, high-performing public service and … not in itself a basis for claims for improvements in pay and conditions'.