Identifier
Created
Classification
Origin
06DUBLIN356
2006-04-04 16:19:00
UNCLASSIFIED
Embassy Dublin
Cable title:  

IRELAND STICKS TO "SOCIAL PARTNERSHIP" ON

Tags:  ECON ELAB EI 
pdf how-to read a cable
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FM AMEMBASSY DUBLIN
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UNCLAS DUBLIN 000356 

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON ELAB EI
SUBJECT: IRELAND STICKS TO "SOCIAL PARTNERSHIP" ON
NATIONAL WAGE TALKS


UNCLAS DUBLIN 000356

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON ELAB EI
SUBJECT: IRELAND STICKS TO "SOCIAL PARTNERSHIP" ON
NATIONAL WAGE TALKS



1. Summary: Biannual negotiations on a new national wage


agreement are underway among labor, employers and the
Government, the so-called "Social Partnership" process
that has underpinned Ireland's past economic success, but
which some commentators increasingly view as
anachronistic. The agreement would establish non-legally
binding but morally authoritative benchmarks for pay
increases and would also set out consensus positions on
wide-ranging social policies. Labor market reform, the
demands of globalization, protection for migrant workers,
the provision of quality public services, and a time
frame for the agreement are key issues that the Social
Partners hope to reconcile by Easter. Discussions are
currently focused on employment standards, with employers
opposing union demands for new employment laws to
underpin workers' pay and conditions, including for
immigrant workers. Whereas past Social Partnership
agreements delivered the industrial peace that made
Ireland an attractive investment destination, some
economists believe that the process is now ill-suited to
a healthy, market-led economy. The partnership process
nevertheless retains its relevance for its
psychologically reassuring message that Ireland is a
country of consensus and a good place for business.
Politically, a general election is expected by May 2007,
and the Government hopes to finalize an agreement in
order to brandish its electoral credentials, to build
support among employers and labor, and to remove possible
distractions from the campaign. End Summary


Social Partnership Talks Underway
--------------


2. Discussions have been underway for over a month to
extend the 18-year-old "Social Partnership" process, a
series of agreements between the Government, employers
and trade unions - the Social Partners - dating back to
the 1980s. These agreements establish non-legally
binding but morally authoritative benchmarks for pay
increases in both the public and private sector, and
embody a consensus approach to a wide range of social
policies, such as healthcare and pensions. The talks,
due to begin in November 2005, were deferred by the Irish
Congress of Trade Unions (ICTU) over plans by an Irish
ferries firm to replace its workers with foreign
nationals earning half the Irish minimum wage. The

dispute was resolved following nationwide protests
organized by ICTU on December 9, in which roughly
100,0000 people took part. Discussions are currently
focused on employment standards, with employers opposing
union demands for new employment laws to underpin
workers' pay and conditions, including for immigrant
workers. The talks were to conclude by Saint Patrick's
Day (March 17),but the participants hope now to finalize
an agreement by Easter, just before the annual
conferences of several larger unions, particularly the
teachers' unions.


What is Social Partnership?
--------------


3. Social Partnership was born in 1987, when the
Government convened meetings among trade unions,
employers, and farmers that led to a three-year
"Programme for National Recovery," the first Social
Partnership agreement. At the time, the country faced
significant problems, such as excessive national debt
(debt to GNP ratio of 150 percent),high unemployment (17
percent) and high levels of emigration (40,000 per
annum). In the bargain reached in the first partnership
talks, labor agreed to accept limits on wage increases
and on recourse to industrial action in exchange for
government guarantees of accessible health care,
affordable housing, and lower personal tax rates. Five
successive Social Partnership programs have maintained
the outlines of the basic bargain. The latest agreement,
"Sustaining Progress" (2003 - 2005),called for a seven
percent private sector pay increase over 18 months, a
minimum wage of seven euro per hour, and improved
redundancy pay terms.


Contribution to Ireland's Success
--------------


4. The Social Partnership approach helped to deliver
Ireland's recovery from the disastrous early and mid-
1980s and has underpinned, through labor market
stability, a sustained period of growth since. The
partnership agreements put a brake on wage increases and
brought down inflation, which facilitated Ireland's

successful participation in the Exchange Rate Mechanism


(ERM) and transition to European Monetary Union (EMU).
By moderating wages and securing industrial peace (an
average of 317,000 days per annum were lost through
industrial disputes in the 1980s, compared with 21,000
days in 2004),Social Partnership also made Ireland
competitive as a destination for foreign direct
investment (FDI),particularly U.S. FDI in the
pharmaceuticals, IT, and financial services sectors. (A
young, educated, English-speaking workforce and favorable
corporate tax rates also helped to attract such
investment.)


What the Trade Unions Want
--------------


5. In the current Social Partnership negotiations, the
Irish Congress of Trade Unions (ICTU),which represents
57 unions, has called for a six-year agreement, with a
wage review to take place every two years. Paul Sweeney,
ICTU's economic advisor, recently told Emboffs that
labor's main areas of concern are labor market reform and
maintenance of employment standards. Sweeney cited the
Irish ferries dispute as having exposed a culture of
abuse and exploitation of immigrant workers, who now
account for over eight percent of the Irish workforce.
ICTU is pressing for an Independent Labor Inspectorate,
on the premise that keeping the existing inspectorate in
the Department of Enterprise, Trade and Employment (the
ministry representing Irish business interests)
represents a conflict of interest. ICTU is also looking
for wage increases of at least four percent, but Sweeney
emphasized that the process was not just about wages. In
that case, he explained, labor might be able to achieve
better wage terms through direct negotiations with
employers and through recourse to strikes. Rather, ICTU
views the partnership process as a platform where unions
can also shape broader social policies, such as pension
reform, healthcare, childcare, and education.


What Employers Want
--------------


6. The Irish Business and Employers Confederation
(IBEC),representing the employer and business community,
is focused on managing the threats and opportunities of
increased globalization and the provision of quality
public services. IBEC's Director of Economic Policy,
Danny McCoy, told Emboffs that public sector pay
increases were the major issue in the talks, noting that
previous agreements gave the public sector
disproportionate increases. For example "Sustaining
Progress" called for an average pay increase of 8.9
percent across the public service, compared to 7.0
percent for the private sector. (Irish economists concur
that a recent rise in inflation above 3 percent is tied
to public sector wage increases, which feed through to
the costs of public services.) For employers, said
McCoy, the partnership process must produce an agreement
that maintains labor market/workplace flexibility,
ensures effective investment in infrastructure, and
assists businesses with R&D and worker training. IBEC
also disputes the unions' argument that newly arrived
immigrant workers are displacing Irish laborers and
exerting downward pressure on wages. McCoy views the
partnership process as a "dinosaur," but a necessary one
to preserve the feeling of economic consensus.


The Government Angle
--------------


7. The Government negotiators, led by Dermot McCarthy,
Secretary General in the office of the Prime Minister and

SIPDIS
overall chair of the process, have called on the Social
Partners to agree to a ten-year framework for the
process, with a wage review every two years. The idea is
to align an agreement with the Government's longer-term
budgetary spending programs aimed at developing a more
dynamic, innovation-based economy. McCarthy takes his
lead from Prime Minister Bertie Ahern, who views the
partnership process as vital to sustaining Ireland's hard-
won economic achievements. Ahern has been instrumental
in previous partnership negotiations, as Minister for
Labor in 1987 and Prime Minister since 1997. (Comment:
Most commentators see Ahern as leaning in favor of union
interests in the negotiations, as his parliamentary
constituents in North Dublin are primarily blue-collar
workers.)

Comment: Does Ireland Need an Agreement?


--------------


8. Consensus and good faith are the keys to Social
Partnership, and each side in the process has, for the
most part, honored commitments in previous agreements.
Employers have given a greater commitment in areas such
as training, childcare, and a flexible working
environment. Trade unions, while protecting the
interests of their members, have worked more closely with
employers in both the private and public sectors to
deliver higher productivity and enhanced quality of
service. Government has delivered on a measurable
increase in the provision of infrastructure and public
services such as health and education, while increasing
the living standards of disadvantaged groups.


9. The question increasingly posed by commentators,
however, is, "does Ireland need a partnership process in
the current economic climate?" In one sense, the
question is moot, as none of the Social Partners has
indicated any intention of abandoning the process.
Significant changes in Ireland since 1987, when Social
Partnership was necessary to redress serious economic
hardships, nevertheless make the question legitimate.
The Ireland of 2006, with full employment, low inflation,
and steady growth, is a healthy economy, where labor and
business presumably could work out the terms of
employment through direct negotiations. Moreover, the
original rationale for the process - moderating wage
growth to make Ireland a more competitive FDI destination
- is somewhat outmoded, since the country can no longer
compete with such FDI magnets as India and China purely
on wages. Social Partnership nevertheless retains its
relevance, in part because employers value the certainty
associated with industrial peace and pre-determined pay
increases, while the unions maintain a degree of
influence beyond what might be achievable at a time of
falling union membership in the private sector (now
roughly 30 percent). To a larger extent, as IBEC's Danny
McCoy suggested, the process remains important simply for
its reassuring psychological message that Ireland is a
country of consensus and a good place for business. This
reassurance is one of numerous factors, including a low
corporate tax rate and an educated workforce, that have
sustained Ireland's economic performance and
competitiveness in recent years.
KENNY