Indeed, in some ways he can claim more credit than many another. His forte was to see the potential of suggestions, frequently made by others and often groundbreaking and controversial, and implement them in an effective manner.
What used to be called the pay agreement, now the social partnership agreement, was instituted in 1987. At that stage it was a relatively small document. The latest incarnation to be published, the Ten-Year Framework Social Partnership Draft Agreement 2006-2015, runs to 138 pages. Towards 2016, as the new agreement is known, is a lengthy set of directions.
It will come as no great surprise to be told that the usefulness of these documents is in inverse proportion to their length. The original agreement was a groundbreaking affair. In those days inflation was much higher and the unions typically were running hard to ensure wage increases outstripped inflation.
The significance of the first wage agreement was that it provided for nominal increases in pay that were below the rate of inflation in return for a promise of tax concessions at a future date.
These only began to be delivered in the following budget, when the standard band was increased by almost 17%. A year later the marginal rate of income tax was cut from 58% to 56%.
Advertisement
The wage agreement, and the partnership process it fostered, were a vital but by no means exclusive ingredient in the process of bringing about the birth of the Celtic tiger.
In the meantime, the agreements have got bigger and the list of participants has steadily grown to the stage where, by now, even the dogs and cats in the street have a seat at the partnership table.
Curiously, the agreement opens by saying that its overall goal is to realise the NESC (National Economic and Social Council) vision for Irish society. NESC is another social partners organisation, so this is a case of the right hand agreeing to do what the left hand has recommended.
Mention of NESC brings to mind the vast and bewildering array of committees, quangos, review bodies and implementation groups mentioned in the report.
This agreement alone proposes the establishment of a further 21 such bodies. As a result, the taxpayer may well wonder if he or she is getting value for money.
Advertisement
Economists have long questioned the relevance of partnership agreements. If you take their core element, which is pay, statistical analysis shows that private-sector companies pay more than the agreed percentages when times are good and, of course, when times are bad they may pay nothing at all.
Usually, however, wage drift has ensured that recorded increases have been in excess of the terms of the agreement. This year, several private-sector companies, including a few large banks, simply went ahead and did deals outside of the partnership framework.
Why then do so many people persist with it? There is a strong political/administrative impetus behind the process. The department of finance is fiercely protective of it.
When we speak of the social partners, one instinctively thinks of a tripartite process involving unions, employers and government. The unions now represent about 600,000 workers out of the 2m workers employed. Roughly half of these are in the public sector.
To a large extent, therefore, the partnership process involves public-sector trade unions speaking to their public-sector employers, overseen by those same employers, ie the government. Little wonder the public sector is quite partial to it.
Advertisement
The question remains as to why private-sector unions and private-sector employers persist with it. The latest agreement is said to have been the most difficult yet and the disagreements were clearly about matters other than pay.
Apart from the general “political” pressures referred to, it is clear that it still brings some benefits to these constituencies. For the employer it gives certainty and convenience, which assists planning. The pay norm is established and can be promulgated without further ado.
One suspects that the unions’ interest is more broadly based. At this stage they have not engaged in local bargaining since 1987 and their attempt to have such an element of local agreement overlaid on the present agreement was thwarted. Twenty years on, their negotiating apparatus must surely be rusty with many of the more experienced local negotiators having moved on.
However, there is another key dimension to the unions’ participation. It brings them to the heart of policy making in a way that was previously unheard of. The plethora of committees and bodies charged with monitoring, reviewing and supervising the partnership process represents job creation on a large scale and must keep many people in full employment.
Over and above all this, there is the political dimension. As is increasingly the case in documents of this type, the draft agreement lists every conceivable policy ranging from the establishment of a new statutory office of the director for employment rights compliance to the relaunching of the hidden economy monitoring group. It even has a section on road safety.
Advertisement
Although most of it is — as a former German Bundesbank president once famously said of the Lisbon agenda — “talk, talk, talk”, it does contain several initiatives apart from the pay provisions.
These are mainly on social housing, education, social services, health carers and voluntary groups. Comprehensive costings for these areas are not given, but they seem likely to add up eventually to a few hundred million euros.
Though the cost of the pay provision is insignificant in 2006, it will cost the exchequer €1.8 billion a year.
All this is taking place outside of the budget and the scrutiny of the Dail. In many ways the biggest criticism of the partnership process is that it disenfranchises the political process.Very late in the day the opposition parties are beginning to complain and a debate on the agreement is now scheduled. It remains the case, however, that the partnership process effectively neuters the opposition.
Perhaps that is why some people are so enthusiastic about it.
Advertisement
PS: Am I the only one who thinks that pensions policy is in danger of going off the rails? Seamus Brennan has asked the Pensions Board to look at the implications of compulsory pensioning, not whether or not it is a good idea, and the chairman of the board was quoted as saying he favoured compulsory pensioning.
A quite different tack was taken by a UK company last week. BAE Systems’ solution was to allow the company’s retirement age to rise in line with life expectancy.
The partnership agreement has an interesting section on pensions. It does not repeat the well-known, but misleading, mantra that “almost half the country’s workforce of 2m does not have any personal pension”. Instead it includes the more balanced assessment that 59%, or more than four-fifths of the 70% coverage target, has already been achieved.
It also announced the publication of a green paper on pensions policy and consultation, yet again, with the social partners.
This approach appears to be designed to run in tandem with the national pensions review, as the government commits to responding to the consultation process within 12 months of the ratification of the partnership agreement.