Wage agreement negotiations will be tough

The negotiations for the new national wage agreement started in earnest this week. So far all parties are indicating that the talks will be tough with expectations across the economy now running very high.

The social partners have about three months to come up with a meaningful set of proposals to put to workers before Partnership 2000 runs out for the private sector in March 2000.

A good deal of background work has already gone on behind the scenes under the auspices of the Taoiseach's Department and the National Economic and Social Council which published a framework document for the negotiations last week.

However, much remains to be done. A significant amount of the talk at this early stage amounts to posturing from both sides. It is notable that no figures have been put on the table as yet and even at its delegate conference in October the State's biggest trade union, SIPTU, refrained from doing so. So far both sides are insisting that all remains to be played for and, of course, the Budget has a large role in this process. From the employers' point of view a significant round of tax cuts in the upcoming Budget will mean less pressure on them to deliver significant wage rises. IBEC, after all, always points to net pay as the key to any negotiation.

SIPTU, on the other hand, has a very different point of view. It points to figures which highlight the greater benefit to business of economic growth rather than wages over the past three years. A key figure which the union will be using - at least in early negotiations - is the one highlighted by the ESRI's Mr Terry Baker in his last quarterly commentary. This demonstrated that over the past three years, the development of the wages element of non-agricultural income has risen some 36 per cent and that is inclusive of employment growth. Over the same time the non-wage or profit side has gone up 62 per cent.

At the moment the unions are saying that the figures must grow more equitably over the next three years as employees are compensated not only through higher pay but also profit sharing. One of the keys to this is what both sides call special tax relief for "innovative reward systems in the profit sharing and gain sharing area in both the private and public sectors". For the public sector this would mean a move away from traditional relativity-based wage determination.

As a result we can expect a move in this direction in the Budget although we may just see an indication of intent as the implementation requires a lot of detailed work.

Profit sharing was mentioned in Partnership 2000 but this was entirely voluntary and while many firms did take an initiative, more did not. However, this may change this time.

According to IBEC's director of economic affairs, Mr Brian Geoghegan, the organisation is "very open to exploring the development of profit sharing and the possibilities this might have to do the deal". And like the unions he also says it must have relevance to both the private and public sector and be backed up by taxation changes.

Personal taxation changes will also be critical. From the Government's point of view this is unfortunate timing as it will have played all its cards including the National Development Plan and the Budget before the agreement is finalised.

Both the employers and unions have already made their suggestions for Budget 2000 public. SIPTU is looking for a package of some £925 million

(€1.17 billion) while IBEC has submitted proposals for a package of close to £800 million in its preBudget submission.

The unions want to see significant movement in the Government's commitment to ensuring that 80 per cent of people pay tax at the standard rate. They are also pushing for a figure of tax-free income of some £10,200 or £195 a week which could be achieved over two budgets. For this year the ICTU is pressing for the first £135 of income to be tax free. At the same time it is proposing a widening of the standard rate bands so that a single person can earn up to £17,200 before moving onto the higher rate of tax.

However, the unions are unlikely to object to the broad thrust of the plan outlined last weekend by the Tanaiste, Ms Harney. In other words a cut in the top rate of tax is likely to prove acceptable so long as sufficient resources are targeted at taking people into the standard rate bands and out of the tax net altogether.

It is also possible, although probably unlikely, that no agreement will be possible on pay. Sources believe one of the most likely reasons for this would be over-inflated expectations on the part of the public service unions.

If this does turn out to be the case there is still likely to be some form of agreement and the structure, including the involvement of community and voluntary groups, is likely to remain, albeit without the wage provisions.

However, in the meantime it is not yet clear when negotiations will really begin in earnest. Sources suggest they will need to at least see the broad thrust of the Budget tax package before any detail of negotiating positions is likely to be visible.

However, there have already been suggestions from individual unions that pay rises of up to 10 per cent could be demanded and according to IBEC it will be entering the talks noting that the European benchmark is around 2.5 per cent. Where and if those two positions can meet is still completely open to question.

jsuiter@irish-times.ie