If the national pay talks are to succeed, argues David Begg, employers need to be more realistic.
Yesterday, after 12 torturous weeks, Congress finally sat down with employers to negotiate directly on the key issue of pay. It would have been our preference to start these talks earlier but, unfortunately, amongst the employers there appeared to be a certain detachment from reality with regard to the problems facing the Irish labour market.
Thus, it took 12 long weeks before we registered sufficient progress on the protection of employment standards and labour market reform, to enable us to move on to the pay talks proper. I would hope that in this strand of the negotiations, the approach of the employers is more grounded in reality. And, from an employer's perspective, reality is really quite favourable at the moment. Indeed, in many respects, Irish business has never had it so good.
This has been confirmed by no less an authority than the Organisation for Economic Co-operation and Development (OECD). In March of this year, the OECD's Report on Ireland featured the following, telling comment: "For more than a decade, Ireland has been the OECD's star performer." And they are not alone in their assessment. The Economist intelligence unit, not exactly a firebrand of the left, has ranked Ireland sixth in the world in terms of its "business friendly environment". Indeed, Ireland's ranking in this regard places it ahead of countries such as the US (8th), Britain (7th) and Hong Kong (10th). Only Denmark, Finland, Canada, Singapore and the Netherlands score higher.
Moreover, profit rises have been well ahead of the rates of increase in gross earnings for every year since 1996, with the exceptions of 2003 and 2004. Estimates from the ESRI show healthy rises over 2005-2006.
Indeed, one only has to look at the vast amounts of investment capital leaving the island in pursuit of foreign assets, to realise that this is indeed a very profitable place to do business. Outward foreign investment by Irish business in 2004 exceeded inward investment. Despite what is often claimed, Irish labour costs remain comparatively low.
In fact, as a new Congress document published today reveals (Economic Outlook 2006: The Case for a Generous Wage Settlement): Irish wage levels are lower than our EU trading partners; Irish workers face higher prices than virtually all other 15 (pre-accession) EU states; Irish employers enjoy far lower taxes and lower social contributions, than their EU competitors.
Ireland ranks 20th on a list of OECD countries, in terms of total labour costs (including employers' social contributions). Simply put, it is far cheaper to employ someone here than in the UK, Belgium, Denmark, the US and about 15 other wealthy economies. In the manufacturing sector, the Congress report shows that hourly pay rates in Ireland are comparatively low (2004 figures). Denmark, for example, stands at $33.75 per hour, while the Irish rate is just $21.94, per hour.
Countries such as Germany, the Netherlands, Sweden, Austria, the UK and even the US show higher hourly rates in the manufacturing sector. Countries such as Spain, Portugal and Italy are behind us in terms of hourly compensation, according to the figures from the US Bureau of Labour Statistics.
Add that comparatively low cost to high productivity and you have a remarkable economic success story. Indeed, in 2003, Ireland's high productivity levels saw it ranked fifth in the OECD, ahead even of the US. This in turn means that real unit labour costs have fallen and are in fact lower now than they were a decade ago. In short, Irish business can well afford a generous pay settlement. To plead poverty now would be to fly in the face of reality and all the relevant data. Irish wages are still low, compared to our chief competitors, but costs are rising for Irish workers. Apart from the cost of living already being 17 per cent higher than the EU 15 (and 22.6 percent above the EU 25) inflation has started to rise again. The figure for March was 3.5 per cent and the outlook for interest rate increases and oil price rises is not encouraging.
Irish people are heavily indebted and projected interest rises will add significantly to mortgage repayments. That is the reality that must be addressed if any new deal is to be concluded.
David Begg is general secretary of the Ictu. He is also a governor of the Irish Times Trust