Pay deal's mid-life crisis fuelled by public sector unrest

Next Tuesday's general review of Partnership 2000 was due to be a routine affair, an opportunity for the social partners to tick off progress on social inclusion and "modernisation" of the public service before the summer break began. But Joe O'Toole's announcement on Monday - that once gardai had been looked after teachers would seek another bite of the public service pay cherry - has changed all that.

Modernisation will now focus attention on its inevitable corollary, public service pay. The Taoiseach has already indicated that markers will be put down, warning Mr O'Toole and other public service union leaders that they cannot "piggy back" on the offer to the Garda Representative Association.

The Minister for Finance, Mr McCreevy, has already issued a similar warning and the director-general of the Irish Business and Employers Confederation, Mr John Dunne, has warned that IBEC would walk away from social partnership if the price was "another round of special increases in the public service".

IBEC's concern is understandable. Since the beginning of the round of national understandings in 1987 the public sector pay bill has risen by 104 per cent, according to IBEC. In contrast, private sector pay has risen by 46 per cent and inflation by 31 per cent. Although some private sector workers have done exceptionally well in the past decade, they tend to be concentrated in highly profitable companies where profit-sharing has given them significant add-ons to basic pay.

For most employees, wage discipline has meant modest pay increases which, without tax cuts, would barely have kept ahead of inflation. Of course, tax cuts are part of the social partnership formula and, arguably, have been the Government's strongest card in keeping unions locked in to national agreements.

Then last December the Government introduced a Budget which may have honoured Fianna Fail and Progressive Democrats election promises to the electorate in cutting tax rates, but seriously destabilised union support for Partnership 2000. The low-paid were left behind and even those on middle incomes found the simplistic approach had pushed more of their earnings to the marginal band of 46 per cent.

With the economy already in danger of overheating, the large handouts to high earners through capital gains tax reductions, as well as cuts in marginal income tax rates, helped fuel inflation. Another prop of the social partnership model has been weakened.

Then there was Ryanair. Union recognition was transformed by a nine-week strike from a heated, but theoretical, debate into an ugly revelation of the unacceptable face of capitalism in post-recession Ireland - at least that is how members of SIPTU, and other unions, chose to see it. Unofficial action by SIPTU members in Dublin Airport forced the Government to set up an inquiry team into the dispute.

Four months later, it has issued its report, but the key matters - low pay and union recognition - remain unresolved. The Government will hold a new round of discussions with the social partners, but there is no obvious solution in sight.

Then there is the national minimum wage. At the IMPACT conference in May, Mr Ahern said the Government would begin to implement the recommended new rates well before the official deadline of April 1st, 2001. Earlier this month the Tanaiste, Ms Harney, seemed to row back, saying the new rates would be in by then.

The result of all this was that the mid-life crisis that has affected every national agreement since 1987 has proved even more traumatic. It was into this lethal mixture that the GRA dispute was injected.

There are three elements to the current offer that make the GRA pay dispute so dangerous. The first is that the Garda is the only group of public service workers to be offered a "second bite". The Government has said the GRA negotiated such a disastrously poor deal in 1994 it deserved a second chance. That sounds suspiciously like a reward for inadequate negotiating skills.

The second element to make the deal so destabilising is that the pay increase offered makes no sense in terms of the Programme for Competitiveness and Work. Particularly puzzling is the 2 per cent being offered as a down payment on future productivity, for which there was provision in the PCW formula and which will, apparently, be paid on top of the 2 per cent productivity clause in Partnership 2000.

More importantly, this extra 2 per cent was put on the table after the GRA engaged in its "blue flu" days of action. Unions which have held their members in line for a decade saw militants in uniform, guardians of the peace, achieve special concessions unavailable to them.

In many respects the only surprising thing about Mr O'Toole's declaration last weekend was that it was so long in coming. Now it has been made the social partners may find it difficult to squeeze the genie back into the bottle. Yet they must try.

As Mr Dunne has said, another round of public service "specials" will mean less money available for tax cuts. It will also spur pay militancy in the private sector, and two of the key trade union leaders there, Mr John Tierney of MSF and Mr Mick O'Reilly of the ATGWU have already indicated their members will not be left behind in any new wage race.

Pay rates are probably less significant in determining overall competitiveness than low levels of corporation tax, but a sudden surge in pay claims would certainly not help. It would also signal that the national consensus on social partnership for which the Republic is being hailed internationally might be coming to an end.

That is in nobody's interest and, in the potentially volatile atmosphere of next Tuesday's review of Partnership 2000, most trade union and employer leaders will try to keep their powder dry. A lot will depend on how Mr Ahern deals with public service pay.

He may well wish Mr O'Toole had kept his mouth shut, but it was only a matter of time before some trade union leader expressed what many of their members had been thinking for months.

Amid the cacophony of sound bites uttered since Mr O'Toole's interview with The Irish Times perhaps the most telling was that of Mr Dunne. The employers' leader described Mr O'Toole's statements as "irresponsible". When asked why, he said, "because when somebody like Mr O'Toole says this sort of thing it raises expectations".