Yesterday’s Sunday Independent carried a piece I wrote on the National Pay Agreement. I include the piece below.

 

LAST Monday, the Irish Congress of Trade Unions ratified the National Wage Agreement. The Irish Business and Employers’ Confederation is also expected to ratify the agreement.

 

Under its terms, public sector employees will receive a 3.5 per cent pay rise in August 2009 and a further increase of 2.5 per cent in first half of 2010. This comes on top of a 2.5 per cent increase which was paid in September, and on top of annual, long-service and other increments.

Strangely, this has been presented as a pay pause by Government, unions and big business. It is no such thing.

Approximately 300,000 private sectors workers are covered by the pay deal. They will receive a 3.5 per cent increase in December followed by an increase of 2.5 per cent in June 2010. In a few months’ time, negotiations will begin about pay increases for the latter half of 2010 and beyond. Have the Government and social partners not noticed that we are in recession?

LAST Monday, the Irish Congress of Trade Unions ratified the National Wage Agreement. The Irish Business and Employers’ Confederation is also expected to ratify the agreement.

Under its terms, public sector employees will receive a 3.5 per cent pay rise in August 2009 and a further increase of 2.5 per cent in first half of 2010. This comes on top of a 2.5 per cent increase which was paid in September, and on top of annual, long-service and other increments.

Strangely, this has been presented as a pay pause by Government, unions and big business. It is no such thing.

Approximately 300,000 private sectors workers are covered by the pay deal. They will receive a 3.5 per cent increase in December followed by an increase of 2.5 per cent in June 2010. In a few months’ time, negotiations will begin about pay increases for the latter half of 2010 and beyond. Have the Government and social partners not noticed that we are in recession?

There are significant differences between the private and public sectors when it comes to the pay: 80 per cent of private sector workers are not covered by the pay deal. This is particularly the case in the Small and Medium Enterprise sector and the multinational sector. The situation is similar for the self-employed, farmers and professionals. Staff working in finance, construction, legal services and real estate face pay cuts.

For the one in five private sector employees covered by the deal, their employers may plead inability to pay. Since the beginning of the year, nearly 100,000 private sector workers have lost their jobs.

The Minister for Finance has called for a patriotic response to the recession. Where is the solidarity or patriotism in the fact that a minority of us should continue to see our incomes rise while the majority will see incomes stagnate or decline?

It is even more unfair that workers facing a pay freeze or cut will have to pay higher taxes to finance pay increases for public sector employees earning more than they do. This is not social partnership, it is economic apartheid.

When the pay deal was made last September, it appeared appropriate at the time. In fairness to the trade unions, they did demonstrate a capacity for pay restraint. However, the economy has deteriorated rapidly and our public finances are in an unholy mess. We are already borrowing money for day-to-day spending and the Government intends to increase borrowing by another billion next year. In 2009, we will have the largest borrowing requirement of any Eurozone country, and double that of America and the UK.

Next year, the Government will borrow €15bn, that’s equivalent to every cent it will take in income tax and more than it costs to run the education system, gardai, defence forces and Department of Agriculture combined. As a result, the Government will have to finance the pay deal through cutbacks in services and increased borrowing.

Last September, it was anticipated that inflation would be about 3 per cent next year, but it is going to be much lower than that. Some economists have even suggested that we could witness deflation for the first time in 50 years. In real terms, a pay freeze might even turn out to be a pay increase. Put simply, the Government cannot afford to meet the terms of the pay deal and should plead inability to pay. Provision could still be made for a flat-rate increase for people earning less than €50,000 to counteract inflation and close the pay gap with the well-paid.

Those of us who have called for the pay deal to be suspended are accused of having a secret agenda to undermine public services. This is not the case. We support public sector reform not because we want to destroy public services, but because we want to save them.

The pay deal should be suspended so that class sizes will not get bigger, hospital wards will remain open and young teachers and health care employees can keep their jobs. The pay deal should be suspended so that we do not have to impose higher taxes on families and business. We should suspend the pay deal so that we do not have to increase the national debt, which has to be serviced with tax revenue that should go into public services and not to foreign banks or governments.

The recession is a challenge for government and the social partners. If the social partnership model is worth anything, it must be capable of responding to rapidly changing realities and be able to place the long-term interests of our society and economy over short-term benefits for a minority.