ANALYSIS:The recent rapid deterioration in the economy is not the only major obstacle to reaching a deal in the social partnership talks, writes Martin Wall.
SOCIAL PARTNERSHIP is facing one of the greatest challenges in its 20-year history, with the Government, unions and employers now embarked on intensive efforts to determine whether a new national agreement can be pieced together.
All sides agree there are major differences between them, not just on pay, but also on employment issues such as representation rights for workers in non-union companies.
It has been a long run-in to the current talks with progress delayed by the extended departure of Bertie Ahern as taoiseach, the election of Brian Cowen as his successor and the Lisbon referendum campaign and its aftermath. Movement was also slowed by union insistence on verifiable progress on the implementation of employment rights measures agreed under the first phase of the Towards 2016 deal.
On top of that, in the 12 months since new national pay talks began to be considered in earnest, the political, economic and industrial relations landscape has changed dramatically. This time last year inflation was one of the main items of concern for both unions and management as was the issue of temporary workers supplied by employment agencies. In the intervening period some previously crucial matters such as agency workers have been addressed (through a new EU directive rather than the social partnership process) while additional contentious issues such as potential cutbacks in public services have emerged as possible deal breakers.
However the recent rapid deterioration in the economy has overshadowed all other developments.
The current national pay deal provided for increases of 10 per cent over 27 months. Unions have argued that this was eroded by higher-than-anticipated inflation, leaving workers at a net loss. Employers have contended that the situation is not so simple and that Government tax concessions have to be taken into account.
From the start of the phoney war about the new deal last autumn, unions have been demanding pay increases ahead of the inflation rate of just under 5 per cent in addition to some measure of compensation for the losses incurred in the previous round.
Only one union - the Irish Bank Officials Association (IBOA) - put forward a precise figure. It suggested a 10 per cent increase over two years. Employers' group Ibec warned against pay chasing inflation and said the proposed 5 per cent increase was not realistic.
The Government has been urging wage restraint for some time, although its credibility on this issue has been dented by the row over pay rises for ministers and senior public servants. Last week, Ibec set the cat among the pigeons when it used an ESRI report on the economy moving into recession to urge a pay pause in the public sector. Ibec also appeared to suggest there was already a de facto pay pause in many parts of the private sector because of the downturn.
Unions were furious at the suggestion that workers should take a hit on pay at a time when they see senior executives in companies represented by employer groups taking home millions in pay and bonuses. Unions have also warned that only the current talks process is holding back private sector workers from lodging new pay claims and that, if the negotiations fail, "open season" will follow.
Trade unions were also angry at the Government for allowing the talks process to effectively drift. They believe this gave Ibec the space to set the agenda in publicly calling for a pay pause. Some unions, such as Unite, are sceptical at employer claims about how they are being affected by the economic downturn. Unite is to produce a report today which will argue that profitability per employee in the average Irish firm is almost twice the level of similar operations in the UK.
Ibec spoke this week of the "immoderate" language used by parties during the public clashes on pay last week and said that it wanted to restrict its comments to the process itself. Certainly some remarks such as those by Irish Congress of Trade Unions (Ictu) general secretary David Begg about the "brass neck" of employers and some people "having their snouts in the trough and wanting to keep them there" indicated the edge that is likely to be present in the current round of talks.
Public criticism of the Government by senior trade union leaders regarding its handling of the talks process was telling, as was the swift public response from an official spokesman rejecting the claims. The Government is the largest employer in the State with over 300,000 employees, but it has yet to publicly show its hand on its proposals on pay. Public sector trade unions such as Impact and the CPSU have ruled out any prospect of a pay pause or pay freeze.
Unions, employers and the Government will meet again today to consider the pay issue but it is difficult to see how the circle can be squared given the public pronouncements of the parties and the increasing focus of workers on increases in the cost of their shopping baskets.
Unions see pay pauses or pay freezes as an effective pay cut given the rate of inflation. Larry Broderick, of the IBOA, emphatically stated on his way into the talks on Monday: "There will be no national wage agreement if there are pay cuts".
But pay is not the only major obstacle to a deal in the current talks. There are also deep divisions on representation rights for workers in non-union companies. Unions argue that legislation which gave them limited rights to represent staff in such firms was effectively emasculated last year by a Supreme Court ruling involving Ryanair. Ictu contends there is a need for the right of workers to collectively negotiate with their employers to be recognised in law and individual unions such as Unite have set the issue of trade union recognition as an absolute deal breaker.
Conversely, Ibec told the talks last Monday that it would not sign up for any new agreement which involved new legislation to make companies recognise trade unions for collective bargaining purposes. Government officials are now meeting all the parties separately in a bid to bridge the divide, although Ministers have themselves ruled out mandatory recognition.
One other issue which has great potential to destabilise the talks process is the prospect of Government cutbacks, particularly in the areas of health and education. Any introduction of a public service jobs embargo could also lead to major problems with the public sector unions. Impact is already engaged in industrial action over recruitment restrictions in the HSE. On Monday, John Douglas of Mandate, which represents retail and bar workers, said that any such cuts could be deal breakers when the crunch came.
It is likely that intensive engagement between the parties will continue for the next couple of weeks and that by the middle of the month all sides will have to take stock to see whether a deal can be reached.
Unions, employers and the Government will have to ask themselves how badly they really want an agreement and how much they are prepared to compromise to achieve one. The reality is that social partnership has come through tough times before. But on other occasions the Government was able to offer trade-offs, whether in terms of tax cuts or increased social spending, in return for lower-than-anticipated pay rises. The scope for such measures this time appears limited.
However all sides agree that social partnership contributed greatly to economic progress over the last 21 years and they are unlikely to abandon the process easily. The possibility of further deterioration in the economy in the months ahead may also concentrate minds.
It is possible that if a comprehensive agreement cannot be reached now, the parties may try to find some middle way rather than jettisoning the entire social partnership process. Such a third way could possibly involve a deal on some elements - for the low paid, perhaps, with other issues being left in cold storage for agreement later. A mechanism of this kind would allow social partnership to be kept alive.
If the talks are seen to run out of steam, the likelihood is that private sector workers will begin to submit pay claims to their employers, particularly as existing deals expire. The current agreement in the public sector runs until September which would give the Government some breathing space. However further industrial unrest could not be ruled out in the event of the Government seeking to unilaterally impose a pay pause.
In assessing their positions, unions and the Government will have to bear in mind also that any deal will require approval by individual union members in a ballot. Some leaders have warned that the "shopping basket effect" as well as issues such as the benchmarking report, mean that acceptance cannot be guaranteed on this occasion.
For union leaders, the worst experience is to negotiate and recommend a deal only for it to be rejected by their members in a vote. The Government, after being rebuffed by the public in the Lisbon referendum, is also likely to be anxious to avoid seeing any new social partnership deal shot down.
An audio analysis from Martin Wall is available on www.irishtimes.com