PPF pay increases still modest relative to the real increases in growth


This is not the time to depress people with dire predictions on the world economy, the weakness of the euro or the depressed state of the IT sector in the US. Nor is it appropriate to be wallowing in the "you never had it so good" rhetoric of some pundits. What is needed is a realistic appraisal of what should be done, an understanding of how to do it and the ability to manage adversity better than we have managed success.

Firstly, we must acknowledge that we have many domestic, economic and social challenges to meet and fewer resources to meet them. We must also accept that we did relatively little about social investment or the redistribution of wealth and resources during the heady days of record-breaking growth, massive profit-taking and unprecedented job creation. In some respects, the most recent Budget made a modest but welcome departure in favour of those on lowest incomes, but did little to address the growing gap between rich and poor.

We still have a major deficit in terms of social and environmental provision. Yet many of the targets which seemed impossible to achieve during a period of massive growth, galloping profiteering, tax cutting and house price inflation could be achieved now in all sectors by a more sober period of strategic public investment, careful economic management and well-targeted infrastructural development.

Our great achievement in the past decade was unprecedented job creation, but despite our own best efforts during the 1990s, Ireland's income distribution was one of the most unequal in the EU at end of the 20th century - when you compare the incomes of the richest 20 per cent with the incomes of the poorest 20 per cent.

Children in Ireland were at a higher risk of persistent poverty than in any of the EU countries. More recent attempts to address child poverty through increased investment in child benefit and to reduce income inequalities through other Programme for Prosperity and Fairness measures, such as the benchmarking and indexation of social welfare payments, should produce better outcomes in the futures.

The PPF still contains the broad parameters to sustain employment, maintain consumer confidence, upskill the labour force and deliver on the social agenda. Pay increases in the agreement are still modest and affordable relative to real increases in growth, productivity and profitability.

The latest forecasts for GNP growth in 2002 range from the Government's own figure of 3.5 per cent to 2.75 per cent from the Central Bank, and 2.1 per cent from the ESRI. Were the out-turn to be closer to the latter, it would have more serious implications for employment. However, as far as PPF commitments are concerned, it is essential to recognise the following critical facts:

(1) Even the more pessimistic ESRI scenario still leaves the average annual growth rate in GNP for the whole three years of the PPF at 5.7 per cent. (2) The Government's own more optimistic scenario raises this average to 6.4 per cent. (3) The forecast in the PPF itself was for an average annual growth rate in GNP of 5.6 per cent.

Accordingly, as the growth predictions of the PPF have at the very least been met, if not exceeded, then the economic conditions have also been met for complete adherence, by both Government and employers, to their commitments under the same PPF.

One of the Government's PPF commitments was to increase tax credits to the extent of completely removing all those on the minimum wage from the tax net. Strict adherence to the terms of the PPF itself would not require that process to be completed until Budget 2003.

But the failure of the Budget to go even half-way towards that objective is all the more glaring against the background of the Government's own promise earlier in the year to fast-track that process and have it completed by Budget 2002.

In the meantime, we will have a general election, with all the uncertainty that this implies. But SIPTU will insist that no uncertainty should apply to the PPF tax commitments requiring completion by Budget 2003, and that all Oireachtas parties should state their unequivocal commitment to meeting the PPF in full.

There is even less excuse for employers not meeting their PPF wage commitments in full. At the end of the day they have continued to increase their share of non-agricultural output ahead of workers. Even based on the more pessimistic ESRI forecasts, the full three-year period covered by the PPF will see a cumulative increase of 47 per cent in profits compared to a 43 per cent increase in total wages and salaries.

All the more reason for the trade union movement to insist that next year should finally see meaningful delivery on the potential for gainsharing which was supposed to have been accelerated by the PPF - but where employers have hitherto engaged in foot-dragging. They have also been abetted by Government failure to provide the promised tax incentives for such gainsharing.

The most serious aspect of the slowdown in the economy relates to increased unemployment. While still a far cry from the mass unemployment that persisted until the mid 1990s, the recent setbacks need to be addressed as a matter of urgency. Live Register unemployment, having bottomed out at 134,000 last May, was back up to 147,000 in November.

Now the ESRI expects it to further peak at 166,000 in the coming year. All the more reason, then, to deplore the fact that, even with additional capital allocations made in the Budget, the provision for total capital expenditure in 2002 is no different in real terms from the provision made for this year in last December's budget.

Des Geraghty is SIPTU general president