The new national pay deal will be sold as the means to end large-scale industrial disputes, particularly in the public sector, for the next three years.
On this basis it is possible that a £2.9 billion public sector pay bill - a 15 per cent or even an 18 per cent pay rise for individual workers over that time - is a price worth paying. After all, a stable environment is good for the economy, perhaps especially from the point of view of foreign investors.
But that is not the end of the story. There is also a minimum of a £1.5 billion tax-cutting package over the same period and the same for social welfare or social inclusiveness measures. All told, the minimum cost of the deal is almost £6 billion over the next three years, which could lead to net income rises of between 25 per cent and 32 per cent. This is a huge stimulus to the economy and arguably, for the future of public-sector pay and public expenditure, it could prove to be an important turning point. The unions have agreed to cast aside old relativities and sign up to a bench-marking agenda. The aim of bench-marking is to recommend salary levels for the main grades in the civil and public service in the light of private sector pay. The bench-marking report will be published in 2002 with a view to being included in the next agreement. The unions have also agreed that any special pay claims will be dealt with through this channel, effectively agreeing not to exceed the terms of the pay agreement.
In what could turn out to be one of the most important sentences, it is stated "it is accepted by both sides that cross-sectoral relativities are incompatible with the operation of bench-marking".
That would have caused much angst on the union side. It means craftworkers will no longer have a claim because nurses did, and so on. Another sentence states that "traditional or historical relativities will not prevent the benchmarking body from recommending what it considers to be appropriate pay". In other words, because prison officers have also had the same pay rises as the gardai, it does not mean they should continue to do so.
But bench-marking could prove a double-edged sword. There are undoubtedly some sectors which may prove to be behind their counterparts in the private sector who will achieve large pay rises. But there are also likely to be others with whose counterparts are in the more traditional indigenous part of the economy who may actually find the reverse.
Quite how the next agreement could cope with pay stalling or perhaps even cuts in is quite another matter. Teachers and civil servants have an even better deal. As "early settlers", they will receive an additional 3 per cent in October, bringing the total pay rise to 8.5 per cent. That will cost the Exchequer an additional £120 million a year for each year of the agreement.
For the private sector it is quite another deal. The pay norms are in no way mandatory and, as Dr Dan McLaughlin, chief economist at ABN Amro, points out, only some 250,000 private sector workers are unionised. Those who are in the traditional sectors, which are still subject to rigid gradings, are more noted for their lack of incentive packages than for rapid progress.
This deal is pouring a lot of additional money into what is arguably an already overheating economy. However, given recent rises in productivity, it is possible that further overheating will not follow. As Mr Dermot O'Brien, chief economist at NCB Stockbrokers, says, so long as women keep returning to the workforce and the labour force generally keeps growing, competitiveness is unlikely to be lost.
Both the Central Bank and the ESRI assumed wage rises of about 5.5 per cent in their latest commentaries. Each believes the economy will continue to grow and in fact the Central Bank has pencilled in a small rise in competitiveness this year.
The risk in all of this is that productivity could fall sharply and wages would not adjust accordingly. That would lead to a loss in competitiveness, which ironically would be welcomed by many as a means of slowing the economy.