Economics: Well into its dotage and long past retirement age it may be but, propped on the crutches of blind faith and policy inertia, social partnership is limping into its third decade.
The question it seeks to answer has become irrelevant and the answer it provides redundant. The new question for social partnership is how to get the public sector to catch up with the private sector in terms of efficiency, performance and accountability.
By making future public service pay increases contingent on reform, partnership could again become useful.
Social partnership was once young and necessary. In 1987 taxation, debt and unemployment had reached crisis levels. Thanks to Alan Dukes's Tallaght strategy, a consensus for action - namely a programme of public spending cuts and wage moderation - was concluded within the Dáil. All agreed that this was in everyone's long-term interest. Efforts by the previous Fine Gael/Labour government to do the same thing had come to nothing in the face of strong union opposition.
When unions looked at the action that government was proposing to deal with the economy, they saw only the short-term costs to their members. The genius of partnership was to secure for them a sufficient slice of the long-term economic benefits by promising a programme of tax cuts.
As illustrated by the so-called "prisoner's dilemma", the idea of social partnership has foundations in microeconomic theory. Imagine two innocent suspects interrogated in separate cells for the same offence. If both remain silent, both go free. If both confess, both go to jail. But suppose the authorities, anxious for a conviction, offer the following deal to each suspect: confess and implicate the other suspect and you'll receive a more lenient sentence while the other suspect goes to jail for a long spell. Both suspects would avoid any sentence by remaining silent but, given the incentive to "rat" on the other, they figure their safest option to be confession, so both end up in jail.
In this situation both parties have a common interest, but because they aren't communicating and don't trust each other they can't achieve it. By establishing lines of communication and positioning government as an honest broker, social partnership enabled employers and employees to get over their short-term conflicts of interest.
The success has been remarkable. By the turn of this decade, the Republic had the lowest burden of income tax in the developed world and one of the world's lowest unemployment rates. With that mission accomplished, social partnership should be put to grass or redirected to the problems of today.
These days, wage growth is not a cause of economic difficulty, but rather a symptom of one. Lack of reform in the public sector and services sector, together with procylical fiscal policies, have made the Republic the most expensive country in the EU in which to live.
Some weeks ago the Central Statistics Office (CSO) shone a spotlight on exactly the new issues that social partnership should be dealing with. Its National Employment Survey showed that, well before the implementation of benchmarking, earnings were already 40 per cent higher in the public sector than the private sector.
The differential is justified by some on grounds that public servants are more qualified than private sector workers. But the real issue - and the problem - is that the public service continually recruits overqualified personnel at unnecessary cost to the taxpayer.
Accounting as it does for half of current Government spending, this differential goes a long way towards explaining why the Republic has among the highest rates of indirect taxes in Europe.
Instead of uniform wage increases across the economy, social partnership should leave the market to sort out the men from the boys in terms of productivity. Where it can make a difference is in the public sector, where market forces are absent.
Given the public sector's abysmal record in this area, social partnership should henceforth link public sector pay increases to reform and downsizing in inefficient and overstaffed areas, savings from which should go back to taxpayers in the form of targeted reductions in indirect taxation, stamp duty and other stealth taxes.
Perhaps the biggest anomaly of social partnership is who takes part in it. The axis of negotiation still divides employers and employees. It should be swung around 90 degrees to form a new divide: private sector employers and employees on one side, public sector employers and employees on the other. From being despised and patronised outsiders, taxpayers and consumers should be formally brought into the partnership fold.
Pensions is another relevant issue. The new agreement, if secured, will probably include initiatives to prevent employers from diluting pension schemes. But the huge disparity created by very generous pensions arrangements for public sector workers, paid for by those in the private sector, has so far been ignored.
Partnership could also ensure that additional spending and extra public service staff numbers are contingent on improved output and performance in the sector. Extra resources devoted to understaffed areas of the public service should be matched by cutbacks in overstaffed areas. It is precisely the failure to manage resources in this way which has led to public sector numbers growing by about 40,000 in the past two years, despite Government promises to cut total numbers by 5,000.
Some very limited movement in this area has already occurred. The latest social partnership agreement is likely to specify "payback" for so-called benchmarking public sector pay increases. But these are likely to be meagre.
What's more, the Government has created a second benchmarking commission to report after the next election, which will probably more than wipe out any benefits recouped. And even before those increases were fully implemented, conditions in the public sector were already very far ahead of private sector workers.
If social partnership is to mean anything, then private sector payback must become its central theme.
