The fifth national partnership agreement in the current series, the Programme for Prosperity and Fairness (PPF) appears to be dead in the water. It does not adequately encompass the exceptional level of change that is occurring in the economy. The Government is faced with a decision as to whether to carry on with the pretence that the agreement is still valid or to propose a thorough reformulation of macro-economic policy.
Despite being only six months old, the PPF has broken down on most of its main terms. Many wage deals have been agreed in both the public and private sectors that are far in excess of the 5 per cent per annum in the PPF. Inflation has risen to more than twice what was envisaged and has entirely eroded the real income gains that the PPF had promised to wage earners.
Other fundamental problems are the resolute resistance of many employers to union recognition and the marked increase in inter-union rivalry. Indeed, an even more fundamental problem for the national agreement is that it has no relevance for a growing majority of the private sector because there are no trade unions in the workplace.
There are many reasons, some good, some bad, why the Government and the social partners might want to keep the PPF on life support. The best reason is that the current series of agreements that began in 1987 has demonstrated beyond doubt its potential for contributing to higher economic growth, lower unemployment and stable public finances within the context of other macro-economic policies, for instance foreign direct investment and the distribution of large payments from EU structural funds.
The strongest reason for a fundamental review of the agreement and other principal economic policies is that the current agreement is manifestly too far removed from the economic reality of Ireland today and, indeed, the social circumstances of most citizens.
Lower unemployment and stable public finances are not relevant politico-economic targets today and are not considered as such by the public. The dominant issue of the day in Ireland is inflation in its widest meaning - traditional goods and services, asset prices including house prices and the inflation of expectations for standard or quality of life.
The gulf between politico-economic reality and the national partnership appears at its greatest when viewed through the prism of the new economy-old economy dichotomy. Irish people can see that there does not seem to be any place in the new economy for trade unions let alone national partnership agreements.
Is there a single new economy workplace that has a recognised trade union, whether the headquarters is in Ireland or abroad? Even where the new and old economy lines are more blurred, it appears obvious to most people that jobs growth is occurring in enterprises that have eschewed or rebuffed trade unions. The starkest manifestation is the successful exclusion of trade unions from Ryanair, Europe's leading low-cost airline, while the national flag carrier dinosaur, Aer Lingus, is currently in the throes of an inter-union battle.
It is worth recalling that there were two fundamental premises underlying the first national agreement. One was a conscious decision by the trade union movement to pursue the German model of workplace relations; national agreements between mutually respecting employer and trade union organisations that was strongly supported by Government economic policies. Secondly, there was agreement on the nature and extent of the economic problems that faced the State and the imperative of tackling those problems.
Even before we all adopted the language of the new and old economy, it was clear that the private sector workplace was going its own way. Now it is experiencing the full forces of rapid technological change and widespread labour shortages.
Another factor in the Irish political economy today is a major restructuring of the economic links and relationships between old and new economies and sunrise and sunset industries and those who work in them. Many enterprises face rapid decline. However, the old economy also contains many essential or still desired services. Discovering the new prices that the old economy will charge the new economy for its services will be a turbulent business, not least for the Government. It will also appear inflationary.
The public is already familiar with many of the important political economic issues not just from the media but from their own workplace and consumer experience and those of their families and friends. There may be far more merit in devising a new comprehensive programme that addresses today's economic issues rather than suggesting that an out of date agreement is still valid when it has clearly been overtaken by events.
Brendan Lynch is an economic consultant
