Recent wage rises likely to be limited to export-driven sectors

A limited level of local wage bargaining in Ireland, confined largely to profitable export-led pharmaceutical, medical devices and food sectors, has been visible since the middle of 2011 and has led to pay increases in these industries of around 2.8% in line with inflation. However, it is unlikely to spread to other sectors of the economy, where demand is much weaker, because of the relative weakness of trade unions and the need to maintain employment during the current recession.

Background

The private sector in Ireland has seen a ‘free for all’ in collective bargaining at local-level for the first time since 1986/87, with the exception of firms that ignored the national-level pay agreements that were a core feature of the social partnership in Ireland between 1987 and 2009.

The independent weekly Industrial Relations News (IRN) recently reported an average 2% increase in basic pay rates for 60 wage settlements across the private sector. These were largely negotiated in the second half of 2011. The IRN reported that, when this average is compared with the consumer price index for 2011 of 2.8% over 12 months, these increases almost matched inflation.

Opinions of the social partners

A spokesman for the Irish Business & Employers’ Confederation (IBEC) confirmed the survey findings were in accordance with its own surveys. These have found that although a majority of firms continue to freeze pay and a minority plan to cut wages, around 25% envisage they will be in a position to pay some form of pay rise in 2012.

The spokesman told IRN that where this does occur, he expected that the ‘median figure’ would be around 2%. However, he said employers were far more adept now at including an element of conditionality in their pay agreements to boost productivity. The employers’ body formally advised its members in early 2011 that they should only consider wage rises in return for exceptional productivity measures.

The largest trade union for private sector workers, the Services Industrial Professional & Technical Union (SIPTU), said its target was an average 2% pay rise per year across various sectors. The union was content to allow negotiators to decide the length of new agreements locally. Some deals are reported to be as long as four years, although most are for one year only.

Alan O’Leary, SIPTU Pharmaceutical Chemical and Medical Devices Sector Organiser, told the IRN that direct engagement locally between management and union negotiators ‘allows both sides to work out the appropriate duration of the agreement which emphasises the specific local preferences of workers and employers’.

Some recent deals

Examples of recent deals include the following examples.

• Rusal Aughinish (alumina refinery) – a 4.5% wage rise over 30 months. A pay freeze had been in effect since 2009 and the company had been on short-time working.

• Teva Pharmaceuticals – a 6.5% pay increase over 33 months. In 2010, the company underwent a major restructuring.

• Bulmers (brewing) – a phased 4% pay increase over 32 months. The deal was concluded with the help of the LRC.

• Danone Baby Nutrition – two pay increases of 2% over the calendar years 2012 and 2013.

• FMC International – a 5% wage rise from 2011 into mid-2013 (concerns just 50 workers). The company manufactures functional ingredients for finished food and pharmaceutical products.

• Kerry Foods (food) – an agreement originally negotiated for a 1% pay increase with effect from 1 January 2011, and a further 1% based on productivity targets.

Informal protocol

The last of the national-level agreements, known as the ‘Transitional Agreement’ (negotiated in September 2008), was not applied by a majority of private sector firms because of the fiscal and economic crisis, though a significant minority did honour it.

Since early 2010 an informal ‘protocol’, agreed by the employer and trade union bodies, the Irish Business and Employers’ Confederation (IBEC) and the Irish Congress of Trade Unions (ICTU), committed their respective members to using existing procedures. These included State dispute resolution bodies such as the Labour Relations Commission (LRC) and Labour Court, to manage disputes over pay.

The protocol set out agreed priorities, such as the maintenance of employment and the need to take commercial and economic factors into account when considering ‘adjustments’ in pay. It also provided for ‘agreed tripartite structures under a rotating chairmanship to include Government’, which would oversee issues arising under the protocol.

Commentary

There is little evidence that pay bargaining will take place outside a limited number of sectors in 2012. The largely multi-national export firms (whether foreign or domestic in origin), mentioned in this update have continued to thrive because exports have boomed despite the recession. This has been one of the few positive features of the Irish economy in recent years, and pay increases for its employees are no surprise.

Unlike previous experiences of what is referred to as ‘free for all’ bargaining in Ireland, there is no sign that trade unions have the capacity, or the inclination, to ‘piggyback’ on these increases and secure wage rises in weaker domestic unionised firms. Prior to the social partnership period (1987-2009), trade union density in the private sector was considerably higher than it is today. Unions often had the muscle to press claims on an economy-wide basis, but they have been weakened by the influx of non-union companies. That said, even if unions now possessed a similar strength, the depth of the recession has eroded company profitability and ability to pay increased wages.

Brian Sheehan, IRN Publishing