Unions to seek pay increases in line with inflation

TRADE UNIONS will be looking for pay increases in line with prospective inflation and productivity growth, together with compensation for real wage losses sustained during the current pay round when negotiations on a new pay deal commence tomorrow.

The general secretary of the Irish Congress of Trade Unions (Ictu), David Begg yesterday told Ictu's economic conference that issues other than pay, such as pensions, public services and employment law will also be part of the talks agenda.

His comment set the stage for a speech by the Minster for Finance and incoming taoiseach Brian Cowen to the conference today. Mr Cowen will say that he is concerned about high pay levels for senior executives in the private sector and express concern at the signals such pay awards send out to ordinary workers in terms of equity and fairness.

Mr Cowen will also call again for pay restraint and argue that increases in pay should follow increases in productivity.

Setting out its stall for the coming talks, Mr Begg yesterday said he "did not believe" that inflation, currently 5.0 per cent, would fall in line with the predictions of leading economic forecasters.

Earlier this month, the Central Bank forecast that "headline" inflation as measured by the Consumer Price Index would decelerate from 4.9 per cent in 2007 to 3.2 per cent this year and 1.6 per cent in 2009. In March the Economic and Social Research Institute (ESRI) projected that consumer price inflation would slow to 3.4 per cent this year and 2.2 per cent in 2009. Mr Begg reckoned that productivity growth, real increases in output per worker, was ranging between 2.0 per cent and 2.4 per cent.

The third strand of the pay bargaining approach sketched out by the Ictu will be on seeking compensation for real pay losses which the trade unions say workers sustained during the current pay round.

In its Economic Outlook 2008: Narrowing the Pay Gap, Congress notes that the terms of the current deal delivered cumulative pay increases of 10.3 per cent over its 27-month term. Over this period, it calculates that consumer prices climbed by 12.0 per cent.

"This is a loss of 1.7 per cent in real terms" it concludes, adding "While Budget 2007 gave an improvement in take-home pay, Budget 2008 did not. As economic growth rose by 12 per cent in the 27 months, workers' share in this growth was nil. Thus there is ground to be made up in the new wage round in spring 2008".

However, three factors have mitigated these potential losses by labour. First, Government has introduced a range of initiatives to cushion homeowners from the worst effects of rising mortgage rates. When mortgage interest is excluded, the cumulative rate of inflation, as measured by the Harmonised Index of Consumer Prices in the 27 months to March comes to 7.8 per cent.

Second, actual wage increases have run ahead of the pay terms of the last pay deal. The ESRI estimates that wages increased by 4.9 per cent in 2006 and by 5.5 per cent last year, with a forecast increase of 4.0 per cent this year. These data indicate cumulative pay growth of 11.7 per cent over the past 27 months.

Third, during 2006 and 2007, the numbers at work advanced by 165,000 or by 8.5 per cent.

While pay will be a central issue in the negotiations, Mr Begg stressed that there are other items on the trade union agenda.

The "real crisis" in private sector pensions needed to be met with the introduction of a mandatory income-related national pension plan; the quality of public services required improvement, while action was needed both to address the issues of employment agencies and the standing of current industrial relations law.

Following a number of recent court cases there is now "no legal basis for collective bargaining", Mr Begg said.

In the coming struggle for a settlement, Mr Begg conceded that "Bertie will be a loss", although he added that he had "no relationship problems" with the taoiseach-elect Brian Cowen.