Collective Bargaining, Employment Creation and Protection, and Competitiveness in The

Collective Bargaining, Employment Creation and Protection, and Competitiveness in the Republic of Ireland

Patrick Gunnigle & Kathryn Brosnan

Contact:

Dr. Patrick Gunnigle

Professor of Business Studies,

Department of Personnel and Employment Relations,

College of Business,

University of Limerick,

Ireland.

Phone: Int + 353-61-202637

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Collective Bargaining, Employment Creation and Protection, and Competitiveness in the Republic of Ireland

In Ireland collective bargaining has occurred primarily at enterprise or national level with industry bargaining less common. Since 1970 national level bargaining has become predominant. Of particular note has been a succession of tri-partite national agreements on pay and other aspects of economic and social policy since the mid eighties. As we will see, a significant focus of these agreements has been on employment creation, protection and competitiveness. Section 1 of this paper now considers the role of national level bargaining since the mid-1980s. However, national level bargaining has not precluded some local level bargaining activity. Thus, in Section 2, we consider developments with regard to enterprise level bargaining in Ireland, specifically the extent to which this has addressed issues of competitiveness and employment creation and protection.

SECTION 1: NATIONAL BARGAINING

Ireland’s most recent period of national bargaining has seen five centrally negotiated agreements since 1986: the Programme for National Recovery (1987-1991), Programme for Economic and Social Progress, (1991-1994); Programme for Competitiveness and Work (1994-1997), Partnership 2000 (1997 to 2000) and the current Programme for Prosperity and Fairness (2000-2003). These agreements deal not only with pay, but with a range of economic and social policy issues such as welfare provision, employment creation and tax reform. They have been the result of national level bargaining between the so called ‘social partners’ (particularly, but not exclusively, Government, Employers and Trade Unions). They have also meant that trade unions have played a pivotal role in shaping economic and social policy to an extent not seen in most other developed economies in recent years.

In terms of enterprise level industrial relations, the most recent agreements (Partnership 2000 and the Programme for Prosperity and Fairness) explicitly set out to promote partnership based industrial relations arrangements at enterprise level. To promote this goal the Partnership 2000 agreement provided for the establishment of a National Centre for Partnership, based in the Department of An Taoiseach (Prime Minister), with a specific mandate to advance partnership arrangements at enterprise level (see Gunnigle 1998).

It is interesting that Ireland’s return to centralised wage bargaining occurred as most European countries characterised by strong corporatist bargaining structures were questioning the merits of such arrangements. Sparrow & Hiltrop (1994) identify the period from the late 1970s to the early 1990s as a time of widespread change in European industrial relations and noted the a general tendency to decentralise collective bargaining and industrial relations to the lowest possible level.

Of course, Ireland’s return to centralised agreements in 1987 occurred in a context of a serious economic depression. Between 1980 and 1987 there was a sharp rise in unemployment from 7% to 18% of the labour force, the debt/GNP ratio increased from 88% to 131% by 1987 and public expenditure outstripped revenue. Trade unions were also under severe pressure, with membership falling by 50 000 over the period 1980 to 1987. According to Sexton & O’Connell (1996) the decision of the Irish trade union movement to “opt for politics” and to enter national level bargaining is seen by most analysts as a strategic re-orientation on the part of union leaders in an effort to prevent further union marginalisation at local level.

Since 1987, four agreements with an average duration of 3 years have been concluded. The pay elements and non-pay elements of those agreements are summarised in tables 1 and 2.

Table 1: % Wage increases under Centralised Wage Bargaining, 1987-2003

Programme / Years / Terms
Programme for National Recovery (PNR) / 1987-1991 / Average of 2.5% per annum wage increase
Programme for Economic and Social Progress (PESP) / 1991-1994 / Year 1 - 4% increase
Year 2 - 3% increase
(+ 3% local bargaining clause)
Year 3 - 3.75%
Programme for Competitiveness and Work (PCW) / 1994-1997 / Year 1 - 2.5% increase
Year 2 - 2.5% increase
Year 3 - 2.5% increase
Partnership 2000 for Inclusion, Employment and Competitiveness / 1997-2000 / Year 1 - 2.5% increase
Year 2 - 2.25% increase
(+ 2% local bargaining clause)
Year 3 - 1.5% first 9 months + 1% in last 6 months
Programme for Prosperity and Fairness (PPF) / 2000-2003 / Year 1 - 5.5% increase
Year 2 - 5.5% increase
Next 9 months - 4% increase

Table 2: Non Wage Elements under Centralised Wage Bargaining, 1987-1997

Programme / Years / Non Wage Elements
PNR / 1987-1991 / Government commitment to reduce taxation burden on PAYE worker - improve social policy provisions - increase employment - (mainly aspirational); Framework agreement on a 39 hour working week
PESP / 1991-1994 / Government commitment as above, some tax reductions, unemployment continues to rise
PCW / 1994-1997 / Government commitment as above, drop in unemployment, some tax reductions
Partnership 2000 / 1997-2000 / Government commitment as above, additional commitment on social inclusion and equality and extension of partnership arrangements at enterprise level
Programme for Prosperity and Fairness / 2000-2003 / Commitment to improve living standards (especially for those on low incomes), investment in transport, housing & healthcare, improved childcare provision, facilitating organisational change/development and promoting partnership arrangements at enterprise level

Employment and Competitiveness Measures

The major employment and competitiveness measures contained in the centralised wage agreements include the following:

·  As with the PNR, the PESP set targets for job creation - 20,000 new jobs each year in manufacturing and a similar number in the international services sector. The need for special measures to help the long-term unemployed was acknowledged. The government committed itself to implementing specific measures such as enacting legislation to protect part-time workers, and changing equal opportunities and unfair dismissals legislation (Von Prondzynski, 1998).

·  Contained in the PCW was the aim to achieve 11 000 gross jobs per annum on average (as specified in the National Development Plan) in indigenous manufacturing and internationally traded services companies.

·  In particular, employment protection initiatives under the PCW aimed at the maintenance of jobs included the following:

- FORBAIRT programmes for assisting firms to raise their capability and competitiveness levels, thus assisting the protection and the expansion of employment,

- a Competitiveness and Employment Protection Unit (CEPU) in the Department of Enterprise and Employment to co-ordinate and oversee the provision of assistance to firms in difficulty;

- through the CEPU, employers will be encouraged to consider options other than redundancies, where these would be appropriate and would not affect the future viability or competitiveness of the firm,

- a review in consultation with the social partners of the strategies in relation to job retention - this review will address:

(a) strategies that can cushion short-term economic downturn and structural problems,

(b)   factors inhibiting early warning of impending closures or redundancies,

(c)   the existing resources and future needs of the CEPU.

The central focus of the PCW was on the growth of employment and the competitiveness on which this growth must rest. The social partners accepted that the key elements in competitiveness are no longer confined exclusively to the direct costs of production, but include the quality of education and training, the efficiency of industrial organisation, the capacity to make continuous improvements in production processes, R&D, the availability of competitive service infrastructures, product quality. Thus, in this context, the social partners recognised the importance of changes in the production process, in skill needs, work organisation, working conditions and industrial relations to realise the potential for growth and job creation with the introduction and implementation of World Class Manufacturing throughout Irish industry being encouraged and supported. The importance of employee involvement in facilitating higher levels of productivity and competitiveness at firm level was acknowledged by the social partners.

However, a recent study by Roche and Geary (1998), while confirming that experimentation in new work practices and employee involvement in change is impressive, reveals that most of this change is primarily management driven. Of those Irish enterprises with team working (57% of workplaces), only 17% had a high level of intensity of group delegation. 51% possessed a medium level and a third had a low level of intensity. Thus, Roche and Geary (1998: 14) conclude that “collaborative work practices[i], particularly of an advances form, are a minority practice”.

Ireland’s two most recent agreements (Partnership 2000 and the Programme for Prosperity and Fairness) were formulated against a background of rapid economic growth. Consequently, the emphasis is not as single-mindedly on economic competitiveness – noted the changed terminology: ‘inclusion’, ‘fairness’. Also, the lower paid are given special protection through minimum amounts of increases and via the establishment of a minimum wage.

Outcomes of the Centralised Wage Agreements: Success or failure?

Sheehan (1998a) in referring to Tansey et al. (1998) outlines the outcomes of the centralised agreements between 1987 and 1997 as follows:

·  negotiated increases in basic pay were moderate, culminating to 36.8% over the decade

·  there was broad adherence to the basic pay terms negotiated in private sector manufacturing. Hourly wage rates rose by 44.3% and average weekly earnings by 42.7% between 1987 and June 1997

·  wage drift was more pronounced in the public sector, where earnings increased by 55.8% between March 1988 and June 1997. Between 1987 and 1998, the Exchequer cost of the public service pay bill increased by 104.4%

·  income taxes on ordinary working households were reduced significantly. The tax take on the average single worker declined from 35.4% of gross pay in 1987 to 26.2% a decade later. For married couples where one spouse was earning average pay, the average tax take fell from 25.4% to 19.6% of gross earnings over the same period.

·  inflation over the decade was low, amounting to a cumulative 28.4%

·  the average number of working days lost due to industrial disputes in the years 1988-1997 was less than one third of the average days lost between 1980 and 1987.

According to Roche (1997) all indicators of industrial conflict have declined under tripartite bargaining - all strike indices have dropped surprisingly, despite improvements in the economy ; furthermore the relative incidence and seriousness of strikes over pay has also declined significantly with many of the most serious instances of industrial conflict since 1987 in response to restructuring work practices.

Both Tansey et al. (1998) and Turner & D’Art (1997) identify all parties as ‘winners’ in the period 1987-1997:

·  employees have been presented with increased employment opportunities and gains in living standards. Between 1987 and 1997, the total numbers at work in Ireland increased by 269 000 or 24.2%; real national income increased by 54% between 1987 and 1996 compared to a 7% increase between 1980 and 1987; disposable income increased by 17% between 1987 and 1996 due to taxation changes according to Turner & D’Art (1997)

·  enterprises have benefited from cost competitiveness and increased profits, however according to Turner & D’Art (1997) the size of company profits increased by a larger amount in the period 1980-1987 under decentralised as opposed to centralised bargaining between 1987 and 1996

·  governments have benefited from increased revenue due to a booming economy which has transformed the budget deficits into budget surpluses

·  moderate annual growth in private sector pay since 1987 has played a central role in recreating a competitive and profitable Irish economy

·  between 1970 and 1987, the annual rate of growth on wage and non-wage labour costs in Ireland exceeded the comparable growth in labour costs in our major trading partners, with a reversal in this trend between 1988 and 1996, when the annual growth in Irish labour costs was below the EU average

·  when trends in productivity are included, labour costs per unit of output produced in Ireland declined between 1988 and 1997, while increasing at an annual rate of 2.8% in the EU over the period. These relative trends provided the foundations for Ireland’s recent success.

The National Competitiveness Council’s Annual Competitiveness Report (1998) reiterates this point. The increase in nominal unit labour costs in Ireland has been the lowest in all EU countries over the past five years; Ireland has led the EU over the years 1991 to 1996 in terms of productivity growth, with an annual average increase of 8% in contrast to an EU average of 2%. Ireland’s cumulative productivity growth since 1991 has been 54.2%, compared with 14.9% for the UK and 20.6% for Sweden. However, most of manufacturing’s productivity growth can be attributed to the foreign-owned sector.

It appears that the centralised wage agreements were probably a success factor in the improvement in Ireland’s economic performance, with the issue of causation unclear.

Wallace et al. (1998), exploring the likely impact of EMU on Irish industrial relations, through a survey concerning the perceptions of senior representatives of trade unions and employer organisations found considerable support for the continuation of centralised agreements. While respondents were in favour of centralised agreements, as a means of meeting the challenges of EMU, any new agreement will have to face several competing pressures. Employer respondents emphasised the need for wage discipline in order to maintain competitiveness while trade union respondents considered that wage increases were likely to be higher in the foreseeable future due to the buoyancy of the economy (Wallace et al.: 1998: 1). Despite the tensions on public sector pay threatening both the current Partnership 2000 and the prospects of a follow-on deal, “the likelihood of another deal remains high if only because after 10 years they are now so strongly embedded into the national psyche that there really is no obvious alternative … these national agreements borne out of economic crisis in the late 1980’s do not fit easily in today’s buoyant economy. It is easier to negotiate and maintain an agreement against the background of economic crisis than in an economy experiencing unprecedented growth. A lot of workers perceive they are not getting the full benefits of the sacrifices they made in the late 1980’s and early 1990’s - sacrifices which prepared the way for today’s boom” (IPD (Ireland) News: 1998: 4).