Stand-off at pay talks as both sides prefer stalemate to bad deal

BACKGROUND:PAY TALKS are by their nature difficult, but those who believe that the present round is the most difficult since the partnership process started 21 years ago may not just be posturing.

Even since February, when the then Taoiseach convened the social partners to negotiate a successor to the first pay deal that was agreed under the terms of Towards 2016, the economic situation has deteriorated at a speed that nobody forecast. In short, everything that could go wrong has gone wrong.

On the day that negotiations were supposed to have concluded, two more pieces of bad news illustrated the dilemma facing all the social partners. Firstly the biggest electricity hike in the history of the State came into force, with the ESB's prices rising by 17.5 per cent. Gas prices are due to rise by 20 per cent in September. Inflation is at 5 per cent, but with mortgages, food prices, petrol and energy prices all spiking, it feels a lot worse than that for many families.

At the same time, the Live Register reached its highest level in a decade. Another 17,500 people joined the Live Register in July. The number of those getting unemployment assistance is now approaching one-tenth of the workforce.

Not since the early 1990s have the social partners had to contend with inflation and unemployment on this scale. Unions have insisted that their members be compensated for rising inflation; employers have steadfastly held that Ireland's competitiveness has been eroded to the extent that significant pay rises will only lead to further unemployment.

Ibec's contention that there should be a pay freeze in the public sector and the Small Firms Association's pursuit of a cut in the minimum wage were never likely to be acceded to, but they marked a determination on the part of employers to play hardball on pay.

Last night a flat-rate increase targeted at low-paid workers was still doing the rounds, but employers in the low-pay sector such as hotel and catering were pleading inability to pay.

The chasm between employers and employees in relation to pay has widened as inflation has increased. The unions believe that without pay keeping pace with inflation there will be a drop in economic confidence and demand, prolonging the present recession; for employers the idea of wages chasing inflation will bring about the same scenario.

As of late last night, bridging the fiscal and philosophical gap on pay has proved to be impossible.

Employers had hoped that collective bargaining, another touchstone issue for both sides, would be parked for the time being to look at its legal implications, but that was deemed last night to be unacceptable to unions.

The Supreme Court's Ryanair judgment, which upheld an employer's right not to have to deal with unions in the process of collective bargaining, has renewed the desire of unions to secure a deal on the issue.

As far as they are concerned, that judgment drove a coach and four through the industrial relations legislation of 2001 and 2004, which was designed to offer disgruntled employees a route that did not involve mandatory union recognition.

Unions believe that it will be impossible to get their members to agree to pay moderation if no concessions are made on the issue of collective bargaining. For employers, anything that goes beyond the mechanisms as outlined in the recent industrial relations Acts is unacceptable.

"We will not have an agreement that has a statutory right to union recognition or a statutory right to collective bargaining. If that's the price of an agreement, quite frankly, there will not be one," said one employers' representative who was involved in the talks.

Other ancillary issues have also proved to be intractable. A new EU directive on agency workers guaranteeing them the same rights as permanent workers is due to come into force in three years' time, but each member state is being given discretion as to how to implement it.

The British government has relented and set a 12-week delay between agency workers being hired and getting the same rights and rates of pay as permanent staff. It has not proved possible to date to find an acceptable time period by which agency workers in Ireland would receive the same entitlements as permanent workers.

Unions fear that, if the process goes into September, the deteriorating economic situation will make it even harder to reach agreement. Employers are more sanguine.

"We recognise the value of having an agreement, but only where the agreement recognises the reality of doing business out there at the moment. There's no point in having an agreement for the sake of it," one said.