The end of partnership might not be such a bad thing after all. At the moment, it is difficult to turn on the TV or radio without hearing someone lamenting the demise of the national pay talks and warning of dire consequences.
For an institution that was supposed — at least, according to the people involved in it — to be the cornerstone of our economic policy, it crumbled pretty quickly. This capitulation in the face of its first real economic challenge suggests that partnership might not have been all it was cracked up to be.
Let’s get one thing clear: our economic growth rates in recent years had nothing to do with partnership. Anyone with a grasp of Leaving Cert economics could figure that out.
The growth rates were more or less a mirage based on a borrowing binge.
As we merrily waltzed ourselves up a debtors’ cul de sac and became the world’s most indebted private sector, this overdraft threw off lots of surplus cash which found its way into the Government’s coffers as various taxes such as VAT, excise duty and stamp duty.
The associated domestic boom in houses, cars, holidays and (demented) consumption, pushed up the demand for labour, generating buckets of services jobs and, in turn, lots of income tax. This created a government surplus and this surplus was divvied up among the social partners.
So partnership was the residual in this equation. Rather than being the beginning of the story, partnership was the result, the final chapter. It was not the catalyst or the spark, but the thankful recipient of a tax surplus.
When we stopped borrowing, late last year, the taxes dried up. There was no miracle, just a shell-shocked debtor clinging to the decaying edifice of a silly housing boom. Without the surplus borrowed cash, there was nothing left to divvy up and the great political structure called partnership has been exposed as another mirage, just like the housing boom. The various claims made about the link between partnership and Ireland’s growth rates are as spurious as the ones that told you houses prices could only go up. These assertions are simply bad economics for which a decent secondary school teacher should fail a student.
This is no one’s fault really; it’s just the way it goes.
Partnership was an example of national corporatism. Its proponents suggest that its existence account for the avoidance of industrial relations problems. They omitted to tell anyone that industrial relations problems virtually disappeared in all English-speaking economies in the past 20 years. The reason for this peace is the most prolonged boom we have experienced since the 1960s. When everyone is doing well, we don’t quarrel.
Furthermore, there is something adolescent about threatening strikes as a means of keeping an agreement together when you know that we are all facing into a profoundly different scenario. No one denies a man’s right to withdraw his labour if he feels he is being taken for a ride. However, this is not what is going on in Ireland at the moment.
Let’s go back to the Leaving Cert economics course to get a clearer picture of what is going on now and what is likely to pertain for the next few years on the industrial relations front.
AS unemployment rises, wage inflation will have to fall somewhat. This is the crux of the problem. We can no longer afford to mop up the unemployed with government-inspired work schemes (as we did by expanding the public sector from 2002 onwards).
So unemployment will rise in sectors where there are no productivity gains. If employers give higher wages without getting productivity increases, profits will fall.
The Government is Ireland’s biggest single employer, so instead of profits falling, if it were to give pay increases greater than productivity (which we know is impossible to measure in the public sector) the budget deficit would grow and could only be paid for by higher taxes or less spending elsewhere. On the other side of the coin, anyone who has been shopping for basic groceries in recent months will realise that inflation is rampant. Some of this is being imported, such as oil prices and food prices, but lots of the “mark up” has got to do with domestic costs. So the average worker — no matter where he works — is looking for wages to compensate for the diminishing buying power of his pay packet.
On top of this, the great Irish borrowing binge has to be paid back. The credit crunch is forcing up the monthly repayments on mortgages for hundreds of thousands of working families who find themselves in negative equity. The “under-40s” are hurting the most. Their take home pay is being squeezed from all three sides: wages have hit their ceiling, inflation is eroding spending power and debts have to be paid.
By the way, this pattern always happens in a downturn. This is what recessions are about and normally the three compounding facts are the recipe for a monumental struggle between workers and employers. And in Ireland, we have a new wildcard in the pack: immigrants.
In our Leaving Cert economic model (which is incidentally colour-blind), immigrants are just another bunch of workers fighting for the same thing. However, they will have the effect of bringing wages down lower than they otherwise would have been if the immigrants were not here. This implies they will be in direct competition with the local workers as the recession bites.
Something will have to give and it is likely that we will see a titanic struggle between workers and management, with immigrants adding a new flavour to the mix. This is something we haven’t seen before.
If the partnership head-honchos are honest they should tell it like it is, as a good Leaving Cert student would. Instead, we are getting spin, deception and finger-pointing.
If that’s all they can come up with, after 20 years of social partnership, then good riddance to the lot of them. They’re not worth saving.
Hi David, Its true that the current impasse/stall of ‘social partnership’ will not damage the economy that much. As you correctly point out, in recent years it was more a case of slicing up the cake as it were. However, it did serve a function back in the ‘bad old days’ of 1990 and onwards when it was first started.Then in the bad times it did serve a positive function in setting out national pay deals. This helped to keep inflation (wage inflation) low. You mention the reasoning for better industrial relations since the 60’s is a boom time. I… Read more »
“If that’s all they can come up with, after 20 years of social partnership…” and after months of ‘negotiations’, it’s really worrying the ‘solution’ proposed is €30 per week extra for 1.4 million (2/3’s) of the workforce. If this is applied to the majority of the‘hard’ working backbone of this economy on the ‘inflated’ minimum wage (compared to competitive economies) this would increase costs by 10%. Everyone knows now (whether they want to admit to it or not) debt fuelled demand levels in the marketplace will continue to decline. Businesses have no choice but to maintain productivity to survive, this… Read more »
The disaffected will emigrate and the social partners’ will cosy up to each other before September.Mark my words.Unemployment will reach 300,00 by June, but trade unions’ only represent those in a job so expect the usual crocodile tears.Irish people aspire to the same living standards’ as america but we can only provide this for half the labour force!.
The unions are in a predicament. If they don’t look after their members when the going gets rough they look ineffectual. It’s easy to secure good conditions when there’s cash aplenty but failure to do so when things are not so easy may make members think twice about the value of union membership. If they chicken out of potentially futile strikes, their only real weapon, they will look powerless. I have a feeling strikes are inevitable. The only question is whether the government or the unions will give in first. Whoever concedes will become virtually powerless. Incidentally this recession would… Read more »
I’m sympathetic to the view that Ireland’s economics was credit-driven binging from about 2001 onwards, but I’m not clear on the value of partnership prior to that, particularly in the late 80’s – early-to-mid 1990’s. (I seem to remember in fact things were so desperate, somebody proposed a government of national unity between all parties for an agreed fixed period, you can imagine how popular that was…). Comments, David, anybody?
Since benchmarking the unelected social partners have been effectively running the economy… the economy was steered to suit the social partners…. high house prices seen as a good thing, opting to keep the building boom going at all costs, and every “partners” wanting their share of the revenue coming in from stamp duty. Very very few of the social partners were direct net contributors to the exchequer, so nobody shouted stop. The easy option was taken as the money wasn’t coming out of anyones pocket at the table. Remember the ATM comment on benchmarking? The people who weren’t represented were… Read more »
There never was an actual social partnership…it was just a social get-together between our so-called leaders supposed to represent us in this country. There is no conflict of interest in this group. They are fully aligned mé-féiners. It is a dictatorship by a collective. You’ll get the same twaddle and groupthink no matter who you vote for. Those who have a union rep are just part of the same collective machine and probably feeling a little more protected right now. This credit crunch will probably last another year or more. We are moving into the general job impact phase of… Read more »
Cool it, David. “The various claims made about the link between partnership and Ireland’s growth rates are as spurious as the ones that told you houses prices could only go up.” Sometimes you come across as a right old Jeremiah. Or maybe Chicken Little. In my opinion, Irish govmints have lot to be content with, regarding the outcome of their policies in the past fifteen years. Of course, times are tough at the moment but they might have been much worse without the social partnership. The main factor causing social antagonism is excessive and overt inequalities. Lets forget debt for… Read more »
Dear Malcom. You are full of it.
The government never saw the boom coming and never saw it leaving. We tolerated Partnership as it kept ministers away from the economy.
Malcolm, I think a few things need to be corrected immediately – 1) Quality of houses has actually fallen. The last 5 years has seen a fall in quality in our housing stock and with poorer surrounding community infrastructure. Apartments are smaller and have party walls made of plasterboard and substandard sound insulation (you can hear them whispering next door) and our sprawling estates have no social ammenities. No planning, no clear means of community management, nothing. A quality house is one built 15 + years ago. 2) The taxes on cars were there to rip off people. Car buying… Read more »
Malcom, I agree with you that they did a lot right and that the past 12-15 years have been great! Yeah, theres a lot of good that has been done… housing stock has been renewed, most of it is better than what was there before…. The thing is we cant forget debt for a moment; its going to drive everything over the next few years. For example, lets consider we have a strike somewhere. Those with no mortgages will be fine, those with will either be a massive drain on their union (there wont be non union strikes) or they… Read more »
Philip says: “1. The last 5 years has seen a fall in quality in our housing stock and with poorer surrounding community infrastructure.” Anyone who buys a home lacking a 10 year homebond guarantee is just foolish. Likewise social infrastructure falls in the caveat emptor category. “2. The taxes on cars were there to rip off people.” I disagree. Car tax was a good leveller. It meant that everybody could see that drivers of flash gas-guzzlers were overtly repaying their debt to society. SUVs on the other hand are actually a necessity in parts of the country where back roads… Read more »
David, you are spot on. Social partnership, certainly during the Celtic Tiger years, was a front for wasting some of the temporary fruits of an unsustainable boom on public service pay. It was a charade. The unions played along to try to preserve their relevance. A complicit Government played along, not having a clue how better to use the windfall.
Hi David,
Interesting news to those of us on the other side of the Irish Sea! The unions within the UK which are also mainly within the public sector are making noises over here. Its not clear where its going – but like Ireland, it looks as if there will be trouble ahead in the GB public sector…
Has anyone seen this short vid on the demise of the Celtic Tiger, from 2006 by the Renegade Economist?
http://www.youtube.com/watch?v=sLGygoQQnzs&feature=related
Is there a longer version available?
Malcolm I find it an interesting argument that the state sector has done, and is doing, a good job. They have their share of blame for the insane economic bubbles that have plagued us for the last 10-13 years. There really is no such thing as a free market operating distinctly from the state sector. All economies sit within a huge web of regulation, created, and enforced by the state sector. Without clear regulations covering property ownership, for example, where would any civilisation have been? It would have been in a dark age, where might was right. Private companies –… Read more »
Stephen Kenny said “I find it an interesting argument that the state sector has done, and is doing, a good job…..it would seem to me that it is exactly the poor quality of our state sectors that has helped cause the problems that, in the end, everyone will have to pay for.” –advancing his arguments in a reasoned way. I just want to point out that I only said they ‘had a lot to be content with.’ No political system is perfect and what we’ve seen recently is the best Ireland has produced since statehood. Regarding regulation, almost by definition,… Read more »
Malcolm said “They are good at making rules, and writing memos, but they’ll never make a billion like Denis O’Brien.” Of course I have to agree. But it is not the job of politicians or state employees to be as competent as top industrialists, just as referees don’t have to be good footballers, but they have to be able to understand and interpret the rules in such a way that the game runs smoothly and fairly. In the instance you quoted, the error was for the politicians to accept the debate at all – it sounds to me like a… Read more »
Hi, David. “Profits up, wages down!” … has been the mantra among the ruling class in Ireland throughout the celtic tiger era; but money was cheap to borrow until recently and that covered the cracks for alot of people while the purchasing powerof their wages dropped by design. Successive pay agreements have tied ordinary workers into beneath inflation pay “increases”, as well as “no-industrial-action” clauses. This renders trade union members virtually powerless. Note all the talk of recession and pay restraint whenever new pay talks/national agreements talks are in the offing? Note all the blaming of the public service pay… Read more »
Not at all sure I see your point Tim. yeah, the public servant gets paid and pays tax. Apart from defined benefit pensions (a huge perk I know) they pay the same tax as the private sector employee. Look at it like this…. That 50k (or 25k) has to come from somewhere. If its a private sector employer, they have to bring money in to pay for it. And to be fair, for private sector there can be grants/tax breaks for some of the money for employee wages ………. again a subvention by the taxpayer. If its a commercial semi… Read more »
Garry, I am sorry that you missed the point. Most of the 25K is returned too.
Private sector employers do raise their prices, but they don’t get back any of the wages they pay.
The Government gets back nearly ALL of the wages it pays by the route explained above.
OK Tim, now I think I understand your point (but I don’t agree with it) If I understand you correctly, your point is “Sure isn’t all of my tax and NEARLY ALL of my after tax wages going back to the government so why shouldn’t the government give me and other public servants a decent pay rise, it costs f*** all” I assume from the earlier posts you are a public servant, sorry if this isn’t the case. First I dont agree that —NEARLY ALL— of your after tax income is going back to the government. Sure, you pay more… Read more »
Modern economies are about people/organisations creating goods and services, and trading them for goods and services with other people/organisations. It was someone like Keynes who pointed this out: You buy a pair of shoes in a shop (€100), so you have the shoes and the shop have some money; The shop buys some shoes from the wholesaler (€80), so the shop has some shoes (to sell) and the wholesaler has some money; The wholesaler buys some shoes from the factory (€60), so the wholesaler has shoes and the factory has some money …… the leather tanner buys a cow hide… Read more »
Police don’t stop the payroll thieves. White collar workers get away with most of their stealing.
Stephen
I agree with your comments on this topic but your last bit about “enjoyable, pleasant and entertaining lives” sounds a little too much like Brave New World. I’d add the adjectives “fulfilling” and “meaningful”!
coldblow
I look around me, and I see the ghost of Aldus, clipboard in hand, slowly ticking boxes on a list…… only a few to go now……
Lads, Public sector pay for Nurses, Gardai and Teachers went down (relative to inflation) during the boom. Purchasing power went DOWN, not up.
David McWilliams knows this very well – read the 1998 “Fitzpatrick Report to An Taoiseach” and you will see that benchmarking and social partnership were the mechanisms used to “reduce the public sector pay and pensions bill”.
A teacher’s starting salary is about 33k now, after a prerequisite University degree PLUS a post-grad qualification.
How many private sector jobs pay that badly for that level of qualification? Can you name any?
Stephen,
Teachers teach the future factory OWNERS/EMPLOYERS as well as the workers, nurses, gardai; nurses bring back to health the current and future bosses and workers and teachers and Gardai; Gardai protect the current/future bosses, workers, teachers, nurses…… and the politicians!
When are we going to start appreciating (and paying WELL) the most important people in our society (not just an economy, not just “Ireland Inc.”)
I am rather sick of all this ignorance and “business-speak” applied to everything.
The commodification of health, education and safety is disgusting. “The haves and the have-nots; a distinction!”, as Joyce said.
Tim Call center work pays far worse and the prospects are worse… Computer programmers or other IT workers often start on less, depending on market conditions and company. These have people at least as well qualified as teachers and are looking over their shoulder at India all the time. Yes with teachers there are difficulties with them starting off…. they often seem to have to work temporarily for years before landing a permanent job… I’d put this down to the fact that once permanent, a teacher can take a career break for many years and then have the right to… Read more »
“Tim said, on August 14th, 2008 at 9:28 pm Lads, Public sector pay for Nurses, Gardai and Teachers went down (relative to inflation) during the boom. Purchasing power went DOWN, not up. David McWilliams knows this very well – read the 1998 “Fitzpatrick Report to An Taoiseach” and you will see that benchmarking and social partnership were the mechanisms used to “reduce the public sector pay and pensions bill”. A teacher’s starting salary is about 33k now, after a prerequisite University degree PLUS a post-grad qualification. How many private sector jobs pay that badly for that level of qualification? Can… Read more »
Tim, Your claim that the purchasing power of public servants deccreased during the boom requires some sort of objective support. Any of the figures I’ve seen quoted in the media suggest that since benchmarking public sector pay has easily outstripped that in the private sector. “A teacher’s starting salary is about 33k now, after a prerequisite University degree PLUS a post-grad qualification. How many private sector jobs pay that badly for that level of qualification? Can you name any?” Sure I can. Analytical scientist for one, where a 4 year science degree and one year postgraduate diploma merits an entry… Read more »
Tim If you read what I wrote a little more carefully, you might notice that I put the teachers on the side of the angels, along with the Police, road menders, and sewerage workers. Without any of these, life would become impossible, and so would wealth creation. Teachers do not create wealth, they enable others, potentially, to do so. Judging state sector pay is always difficult. A private company can judge someone’s pay by the value of what they’re doing. If pay gets too high, the company goes broke, if it’s too low, the competitors pinch all the good staff.… Read more »
Gilbert, Kieran Allen’s book, “Celtic Tiger: The Myth of Social Partnership” succinctly presents all the objective research to support my point. However, the Government and media spin on this issue has succeeded in convincing most people that “public servants” are a type of parasite. How many timesdo we hear and see people in the media speaking about pensions as if public servants get them for free? I have to pay for my pension for 40 years! (as does every public servant I know). But I have to endure these people telling me I get something for nothing. Then, the likes… Read more »
Tim Putting all state sector workers into one basket is of little use. Some are vital, some are very important, some are important, some quite important, and so on down to the full-time pencil-sharpeners employed, metaphorically, by very important civil servants and politicians. Over the past 10 years, the economy has been enjoying a virtuous spiral based mainly on debt, and slightly on US multinational companies (MNCs). The presence of the MNCs is based on very low corporate taxes, and a global virtuous spiral, based, mainly on borrowing. Unfortunately, the return on the borrowed capital has been half of nothing… Read more »
Stephen, I would be willing to take a pay cut if I were not already barely living hand to mouth. It is a LIE we have been told that public sector workers got high pay increases through social partnership and benchmarking; even those that did receive small increases were rising from such a low base that it made little difference (2% of nothing is nothing). I once had a 10% pay cut just because a student in my class died of a brain tumour and this reduced the DES’s little “colour-by-numbers” threshold of “bums-on-seats”, so my extra (numbers based) €3000… Read more »
By the way….. I have been speaking, at all times, about public servants, not civil servants (coccooned in offices away from people).
Tim, If you are unhappy in your job, believe you are being taken advantage of believe you can have a more rewarding life (you decide what rewarding is), stop complaining and go for it. However, Look very carefully before you decide to jump, the grass isn’t as green on the other side as you seem to think, these days plenty of people would like to make the jump in the other direction.
Tim, Broadly, the government will have to cut spending, whether anyone likes it or not, it’s merely a matter of what they cut. Politicians being what they are, you can expect them to cut the important stuff, and leave the nonsense be, generally. Agency nurses pay is directly linked to state employed nurses pay, it’s higher by definition: Whatever a state nurse gets, an agency nurse gets more, or they wouldn’t go the agency route. An agency nurse lacks the protections, pension, regularity, and usually holiday pay, that a state nurse receives. Also, of course, it’s a job that requires… Read more »
You guys seem to have succumbed to the Thatcherite spin we have been fed over the years. Down with society, up with Ireland Inc.
I give up.
Have a look at this Tim, http://www.independent.ie/national-news/thousands-of-jobs-lost-as-courses-snubbed-1457757.html
Demand for science, IT and engineering courses is down compared to teaching. Could it have anything to do with salaries and job security? 31k for engineers (4 wks hols, defined contribution) vs 33k for teachers (4 months hols, defined benefit)
Ok…… one last try, since you mention engineers and teachers’ salaries (teachers have to contribute to their own pension to.) Engineers salaries, see here: http://www.irishjobs.ie/ForumWW/SalarySurvey.aspx?SalarySurveyID=406&BannorID=&BZoneID=0&ParentID=75&CID=16 Teachers’ salaries on the DES website here: http://www.education.ie/servlet/blobservlet/teacher_scales.htm Compare at 2 years’ experience, 4 years, 10 years, etc……… The comaparison is clear. Please do not misunderstand me……. I believe teaching is a great job; In fact, if it was paid properly, it would be the greatest job in the world. It is very rewarding to deal with “human beings instead of tins of beans”, just not financially so. Just fighting my corner in an economic… Read more »
Tim, I don’t think I have ever said teachers etc are parasites on the economy. All I’ve said is that money has to be found to pay them, the supply of money is reducing and students are voting with their feet, whether they are showing wisdom beyond their years or whether their parents are telling them to get a good steady job is a different matter. Your not comparing like with like… I haven’t had time today to look at how teachers salaries grow over time, I imaging its well defined, serve X years get Y more……. but I would… Read more »
Tim, “Kieran Allen’s book, “Celtic Tiger: The Myth of Social Partnership” succinctly presents all the objective research to support my point. However, the Government and media spin on this issue has succeeded in convincing most people that “public servants” are a type of parasite.” Having heard plenty of Kieran Allen and what he has to say, I’ll save myself whatever it is his book costs, thank you very much. You could do us all a favour by repeating his succinct case here, I’m sure he’d thank you for it. “How many timesdo we hear and see people in the media… Read more »
Gilbert….. Jeez! Don’t you have children at school? Ask your “teacher Friends” about what is called a “temporary Special Duties Teachers Allowance” and see what they say. Most teachers are female, anyway, and do not even know what their salary is, because their husband has a REAL salary and they do not have to worry about money. I know female tachers on less than 40k pa who live in Foxrock – (the REAL Foxrock, like Brighton and Torquay Road)….. ENOUGH! If you reckon that teaching is a better job for you, please, come and join us – we need you!… Read more »
You don’t, Really have any friends who are teachers, nursers or gardai……… do you?
They are too poor for you.
Tim, No, I don’t have kids. “Ask your “teacher Friends” about what is called a “temporary Special Duties Teachers Allowance” and see what they say.” I’ll ask. But by definition I’d imagine it’s temporary, so maybe you shouldn’t have been suprised when yours was cut. “Most teachers are female, anyway, and do not even know what their salary is, because their husband has a REAL salary and they do not have to worry about money.” So can we add female teachers to the list of workers not pulling their weight in society? I mean if they’re not earning a REAL… Read more »
BTW Tim, I pay my rent to a teacher, and have paid rent to Gardai in the past. Even with the current state of the housing market, it’ll be a while before I’ll own my own place. Make of that what you will.
Gilbert,
You think that is ok?
I am on your side, yet, you oppose me?
My fight is your fight.
I do not have to re-check my friends’ thing on O’Connell St.,
My friend had a 6 month suspension after that, because he was upset and hit a few “perps” more than the PC crowd thought he should.
After a further 6 months psychiatric assessment, he was allowed to work and earn money for his family.
Gilbert……. You are, obviously, a very good person;
Otherwise, you would not be here…. On DMc’s site, or engaging in conversation with ordinary PLEBS, like me.
What if the private and public sector workers started “feeding” and helping eachother and promoting our salaries instead of running eachother down? Like the Government asks?
You CANNOT compare the salary of a teacher with that of a barrister!
You don’t get away with that – the differential is about 1000%.
That is not allowed in a discussion.