Industrial Realations System Strainde by Employers - SIPTU Conference
18 Nov 2006
Employers Actions Straining Limits of Irish Voluntarist Industrial Relations Traditions
Address by David Begg General Secretary Congress to SIPTU Regional Conference, Waterford, 18 November 2006
In recent months we have had to grapple with a series of industrial disputes which reveal a disturbing and unprecedented pattern. Most, but not all, concern pensions. The pattern is one in which the employer declines to participate in the National Implementation Body, in the Labour Court or refuses to accept recommendations of the Court or to accede to requests from it for some gesture to stabilise the dispute. I have in mind two disputes involving Independent Newspapers, Greencore and currently Bank of Ireland.
The new Partnership Agreement 'Towards 2016' contains specific provisions relating to pensions. This topic was strongly advocated by Congress because we were well aware of the problems manifesting themselves in the private sector. Unusually, it took 3 weeks after settlement of the wage element of the agreement to finalise the section on pensions, reflecting the contentious nature of the issue. It appears from recent events that employers are consciously, and in a considered way, abandoning this aspect of the agreement.
The collapse of the world equity markets in 2001, the low rates of interest on bond yields and increasing longevity have combined to undermine the funding structure of Defined Benefit pension schemes. The unique feature of Defined Benefit as the name suggests, is that it guarantees a pension commensurate with service at retirement. The employer must ensure that the contribution rate is kept up to a level, prescribed by Actuaries on a periodic basis, sufficient to guarantee the retirement pensions. Defined Contribution schemes guarantee nothing. The pension a person gets on retirement depends simply on the amount of money in the fund and the cost of an annuity to back the payment of the pension over the person's remaining lifetime. In other words the key difference between a Defined Benefit and a defined contribution pension is that the employer carries the risk exposure in the former and the employee in the latter. It is little wonder then the employers are abandoning Defined Benefit schemes wholesale!
The consequences for the worker and ultimately the state are very serious. Employers are shedding their responsibility and it is inevitable that many workers will have insufficient pensions when it comes to retirement. With an increasing ageing demographic profile the numbers of people in old age in the next 10-15 years will become a real problem for the state - on the assumption that Ireland will not be willing to tolerate high levels of pensioner poverty. Thus business is transferring its obligations to the state. It is an outrageous abdication of responsibility and I fully endorse the criticism of Bank of Ireland voiced by the Taoiseach earlier this week.
On Wednesday last the Executive Council of Congress considered this matter in some depth. It condemned the actions of Bank of Ireland, an extremely profitable company, its disregard for established industrial relations procedures. Congress will give its full support to the unions is their efforts to achieve a satisfactory outcome to this dispute.
It is not difficult to see why employers do not want to abide by directions of the Labour Court or NIB. No institutions of the state could stand over actions calculated ultimately to burden the tax payer. These companies are not willing to submit their unjustified actions to independent judgment.
The patterns of these recent cases, the standing of the companies concerned within the business world, their enormous profitability and their influence, taken together amount to a developing crisis in our industrial relations system. Since the war Ireland has utilised a voluntary code of industrial relations standing on a platform of very well tried and effective institutions such as the Labour Court and the Labour Relations Commissions. Those institutions were effective in maintaing industrial peace because, with occasional aberrations, both sides of industry accepted their authority. That employers of such substance and strategic importance, acting together in as apparently deliberate manner, are choosing to no longer recognise this authority calls into question the continuation of a voluntary system.
Other factors too are pressing upon the efficacy of the voluntary code. It is clear that the European Commission no longer intends to promulgate social policy through primary legislation or directives which have to be transposed into domestic law. Instead it intends to proceed via social dialogue agreements between ETUC and UNICE. Collective agreements of this nature can achieve the status of law in most European countries but not in Ireland and the United Kingdom. Therefore, we run the risk of being in the slower lane of a two speed Europe as regards social policy because of our voluntary code of the industrial relations.
The third consideration is the limited scope in our system for legally binding wage rates. The only binding rates are those connected with Registered Employment Agreements, joint labour committees and the minimum wage. This affects a small minority of the labour force. It is instructive to look at the most recency published CSO figures for wages. They indicate that in some economic sectors at least incomes are running below the levels set by the National Wage Agreements.
The Winter Commentary of ESRI put it like this:
"Over half of the extra jobs created in the year ended Q2 2006 were filled by immigrations (54 per cent). This implies that the migratory inflow is playing a crucial role in facilitating the on-going growth of the economy. In the absence of the inflow, wages would likely have risen to a level that would have choked off further increase in labour demand. Of course, this implies that resident labour may, on average, be worse off (relative to where they otherwise would have been lost) as a result of immigration even though their losses are surpassed by the gains to capital"
Notwithstanding the vary considerable achievements in improved employment standards in 'Towards 2016' it is clear that the minimum wage has become the default wage for many people who come to work in Ireland. The absence of legally enforceable wages in many sectors of the economy and the lack of legal enforcement of the pay terms of 'Towards 2016' itself suggests that this trend will continue.
Taken together these factors build into a persuasive case for a move towards a more legally based system of industrial relations. It is hard to argue, in the present context at any rate, that collective agreements should not be binding and use of the Labour Court in industrial disputes mandatory.
I realise that these ideas might give rise to reservations in our own ranks. Frankly, I do not want to abandon the voluntary system myself, but if employers are no longer willing to accept its authority then it cannot function.
What do employers themselves think about this? Do they feel that they can ignore the institutions of the state when it suits them and return again when conditions change? They may find that workers will become similarly selective. If the voluntarist system breaks down the alternatives are a retreat into legality or industrial relations anarchy. Neither is very palatable to me. I would remind employers of the old adage of Richard Nixon's "once the toothpaste is out of the tube it is very hard to get it back in again"
There will be a temptation for opponents of social partnership to ascribe these current difficulties to shortcomings in 'Towards 2016'. Nothing could be further from the truth. Indeed it is perhaps the robustness of the terms of the agreement which has influenced the employers not to adhere to those terms. The only problem with the agreement is its lack of enforceability.
It is well to remember that we live in a rough world right now.
At the heart of globalisation is an apparently inexorable reordering in which the state is becoming little more than an instrument for restructuring national economies so that they are more responsive to the demands and disciplines of the capitalist global economy. This has allowed the power of capital to grow relative to labour. The economic integration of one and a half billion new workers from China, India and Eastern Europe is putting a downward pressure on wages. Outsourcing of manufacturing particularly is having an effect for it was through well paid manufacturing jobs that many people moved into middle income territory. In the US, for example, median household incomes have remained static in real terms since 2000. These pressures will continue until the less developed regions of the global market converge with the developed regions.
This week saw the passing of Milton Friedman, a man whose neo-liberal economic theories have had a profound influence in bringing about the conditions I have just described. This outlook has seen the social purposes of the state being subordinated to the market logic of capitalism. What does that mean in everyday life? Well, for example, it means that people are paying higher mortgage interest rates than they need to. Friedman was a monetarist, which means for one thing that inflation is driven by money supply. There are a majority of monetarists on the board of the ECB and they are driving up interest rates even though inflationary conditions as such are not really evident in Europe, although there is a growth in money supply. This is an ideological affliction the rest of us have to live with.
Against this background the extensive legislative and other measures built into the agreement to prevent exploitation, the basic pay terms and, hopefully a decent increase in the minimum wage are not insignificant. It is a case of the trade union movement maximizing its collective leverage to protect ordinary people against free market ideologies.
The only way for us to survive in the new world order I have described is for workers everywhere to organise and to act in a way that maximises our collective strength. At times we conduct our internal discourse as if we were still living in the Seventies. That has to change.
At the end of the day though, the best weapon is our arsenal is numerical strength. If we could achieve what we have achieved with 39 per cent of the workforce how much more could we achieve with 50 per cent. Recruiting and organising is now, more than ever, our priority.