The idea of partnership needs to be reinvented, and an emphasison a mainly pay-based deal may no longer be either possible ordesirable, argues Cliff Taylor, Economics Editor.
Born in adversity, is partnership about to die as the economy enters another difficult period? The first deal - the aptly named Programme for National Recovery - was struck in 1987, in the midst of a real economic crisis. Now, 15 years later, the extraordinary experiment may be drawing to a close, as the economy again enters dangerous waters, albeit not facing the kind of horrendous debt levels and high unemployment that prevailed in the late 1980s.
A final attempt to salvage some kind of deal early in the New Year is likely. If the process is to be saved, however, all sides need to realise that the game has changed and that pursuing a mainly pay-based deal may be neither possible nor desirable. "Partnership" needs to be reinvented. Whether it is too late to do so - particularly with the costly benchmarking review in the mix - remains to be seen.
In the talks so far, there has been much talk of employers' demands for "compliance". In many ways the debate in this area goes to the heart of the issue. Put simply, employers feel that trade unions took advantage of the boom times to push for increases above and beyond the terms of the previous deal. The issue is all the more critical for employers now, as they argue that many companies are in difficulties and will not be able to afford any increase at all - or, at best, one smaller than the national norm.
If they come back to try again early in the New Year, the talks only look likely to succeed if some way can be found to build the required flexibility into any pay terms - allowing firms in trouble to opt out or delay rises and allowing mechanisms to deal with a more prolonged and generalised economic downturn. Given the obvious lack of trust between the two sides, this will not be easy.
Or else the negotiators will just have to agree that pay will be set locally; this will either mean the end of partnership, or that there could be an attempt to strike an agreement on non-pay issues to allow a more limited form of social partnership to continue.
Either way, it is clear that a centralised pay "deal" offering the same percentage rises for all can no longer be at the heart of partnership. Whether some general and flexible pay "norm" can be is another question.
In previous agreements it did make some sense to include pay as the central element. In the first deal in late 1987, pay rises below inflation were agreed, on the basis that it would help correct a dreadful economic situation.
Subsequent deals traded moderate pay increases for tax concessions. The graphic above right shows how this led to significant increases in living standards - remember the percentage increases shown are the real (after inflation) increase in purchasing power due to pay and lower taxes. A single person on an average wage had a 60 per cent rise in real take-home pay between 1987 and last year, while a married couple with one person earning had a 53 per cent rise.
Now times have changed. The Government simply has no money to give to tax cuts and thus the key bargaining chip for wage moderation is gone. Also, given the uncertainties facing the economy heading into next year, there is little point in trying to negotiate one central wage figure.
Some employers - particularly those in labour intensive sectors - will simply not be able to afford any increases. Figures yesterday showed 18,000 jobs lost in industry in the year to September, a clear indicator of the pressure on many companies. Even in cases where companies are making profits, it will make sense for many to tie pay awards to specific changes in work practices or productivity, which are best negotiated at local level.
In the public sector, the case for tying wage increases to specifically negotiated changes is even stronger. The report on benchmarking public pay, published earlier this year, recommended rises averaging 8.9 per cent, ostensibly to bring public servants to the level of their private sector counterparts.
The first phase of this, amounting to one quarter of the recommended rise, was allowed for in the Budget. However, the rest is due to be tied to specific productivity improvements. While there have been negotiations on these, the risk is that appropriate concessions might not be seen as part of a generalised partnership process.
In fact, there is a risk that the benchmarking process has already undermined the solidarity of the partnership process, as the report recommends big increases for public servants but provides no data to back up its conclusions.
Public servants would receive any general increases agreed under a new deal, on top of their benchmarking rise. Private sector employees, meanwhile, will realise that the cost of benchmarking is one of the main pressures on the Exchequer ruling out further tax concessions.
Against this backdrop, reinventing partnership will be no easy task. With deals in the past based on a "one increase for all" formula, the benchmarking process already means that the current deck of cards is stacked in favour of the public servants - and that the potential gains for employers and private sector employees of doing a deal are questionable.
If we are, indeed, seeing the dying days of partnership, then much will change next year. For a start, employers and unions will have to engage in local bargaining for the first time in more than 15 years. It is no small matter that neither side quite remembers how this worked, or has a large cadre of people with the necessary experience to pull it off. Thus, the risk of industrial conflict would probably rise.
The way the economy is "run" will also change. Under the partnership agreements, pretty much everything that was important went through the central review committee overseeing the deal. This became an important clearing house, not least for dealing with problems, to the extent that some believed it disempowered the Dáil.
Given the extent of this "say" they have been given in how the economy was run, most of the social partners will probably have one more go at saving the partnership process. If you want to continue to have this access and influence, the Government will tell them, then you have to sign up again.