Did the Programmes deliver?

- some facts and figures

 

Mary Muldowney

SIPTU Education Branch,

Trinity College Dublin Section


Introduction

This paper will provide a short review of some of the key features of the partnership programmes and the PCW in particular, in the areas in which the programmes have hit our pockets. I hope that it will stimulate consideration of the alternatives to centralised bargaining, with the ultimate aim of securing for workers and unemployed their fair share of the economic boom which put Ireland's Gross Domestic Product at the top of the EU growth tables in 1995 for the second year in succession. Negotiation of previous partnership programmes, the PNR, the PESP and the PCW, could be justified to some extent because there was at least a possibility that they might benefit workers and unemployed. The failure of the government and employers to deliver on core commitments in the PCW and the significantly weaker position in which workers and unemployed find themselves as the programme draws to a close are reasons enough to urge our union leaders not to enter into another national agreement.

General Background to the PCW

The operative period of the PCW coincided with a period of growth in the Irish economy which has been estimated to be as much as 26%. The Central Bank, in its pre-budget forecast this year, applauded "the phasing of increases associated with the Programme for Competitiveness and Work" as one of the reasons for the control of inflationary pressures which facilitated an average 6.5 - 7% growth rate in 1995. Supporters of a further programme -argue that sustained high rates of growth are a reason for continuing the social partnership. Certainly, from the Government's point of view, the political benefits of a further deal must seem compelling:

Employer organisations share the government's enthusiasm for entering into a new programme for much the same reasons, particularly the benefits they gain from Ireland's perceived competitiveness in terms of wage costs and non- interventionist state policies. They are eager to enter into the proposed EU Confidence Pact for Employment which was be discussed in Dublin in December, at the EU Summit (5).

The advantages to government and employers of a further national agreement are clear, based on the performance of the PCW and its forerunners. What is equally clear is the unacceptably high price paid by the workers and unemployed for the 'successes' referred to above. Even if unemployment figures have fallen under the PCW, the benefits to the long-term unemployed have been negligible and there is doubt about the real value of the jobs which have been created. Promises for tax reform have not been kept while a wider band of social welfare benefits has been subject to taxation and workers' living standards fell far short of what they should have been in a boom economy. These shortcomings have to be viewed against a background of increasing constraint on the trade union movement at local and national level.

Employment and Unemployment

The argument about the efficacy of the Live Register or the Labour Force Survey as the most accurate measure of unemployment continued through 1996 and has not been resolved. I do not propose to discuss here the recent allegations of widespread social welfare fraud but I will say that the outrage expressed by the media and certain politicians at the so-called 'revelations' might be more appropriate if applied to the consistent policy of tax evasion practised by many in the corporate sector. Regardless of whichever set of statistics you accept, both Live Register and Labour Force Survey figures show a rise in the numbers of people in employment, with particular growth evident in the manufacturing, construction and service industries. The 1995 LFS showed an increase of 49,000 (25,000 males and 24,000 females) in the workforce, with the main features of this increase as follows:

The number of unemployed persons is estimated to have decreased by 26,000 (19,000 male and 7,000 females) in 1995, according to the Labour Force Survey. The Live Register figures also show a decrease in unemployment, although it indicates a fall of 18,600 in the 1994/95 period while the LFS shows a drop of 38,000 in the two years to mid-April 1995 (6). Between 1989 and 1995 the total number at work in Ireland rose by 143,000 but of this figure, only 56,000 are full-time jobs. There were 28,000 people on job schemes and 59,000 working part-time (7). So in reality there is little cause for optimism. The increase in numbers of employed represents mainly new entrants to the labour force and there is virtually no change in the numbers of long term unemployed.

In fact, unemployment rose by 15%, from 1987 to 1996, despite the economic boom. The SIPTU document, Life after the PCW, says "the most notable positive feature of the 1996 budget is that it represents a serious attempt to address the national priority of reducing long-term unemployment".(8) However, it also admits that the PCW's commitment to take proper account of the views of the National Economic and Social Forum has not been met. The NESF report on Ending Long-Term Unemployment expressed concern about the level of pay for participants in the Community Employment programme, which is significantly lower than the going rate. Living standards of social welfare recipients have also been hit by increased taxation of benefits. Although the 1996 budget provided a small increase in basic rates of social welfare payments, the purchasing power of such payments has improved by only 0.3 % over the last two years (9). The Social Progress Index, devised by two economists and presented to a recent social policy conference, was compiled from 15 variables, including poverty, unemployment, real hourly wages and net migration. It shows that while Ireland's GNP grew by an average of 2.94% per year between 1977 and 1994, and GDP rose by 3.35% per year, the SPI increased by only 0.048 % per year.(11)

A pessimistic interpretation of the increased employment figures is also suggested by the fact that the area of largest growth is in the service sector, which has been most afflicted by casualisation. The service sector includes such areas as banking and insurance, and conditions in these areas are not good for non- managerial grades (See Table 1). There are also inequalities within inequalities, in that many women are still earning considerably less than men doing similar work. According to the Central Statistics Office, average weekly earnings for men in manufacturing industry are higher than the average weekly earnings of employees in banking, insurance and building societies, which are not broken down by gender but which studies have shown are mainly women. There is a significantly greater number of women than men working in the catering area, for example, where conditions are notoriously harsh. Women are disproportionately represented across the range of service sector jobs at the lower end of pay scales, despite the PCW's commitment to foster equality in the workplaces.


TABLE 1

Average Weekly Earnings December 1995

 

 

From Central Statistics Office, Economic Series, July 1996


Many of the jobs which have been created under the terms of the PCW are low paid, low status and impermanent. Often the terms of previous programmes have not been met by employers. Between 1987 and 1996 average hourly earnings in Irish manufacturing industry increased by 44%, compared to a increase of 55% among our major trading partner's.(13) The table shows you the relationship between average earnings, living standards and Gross Domestic Product (see table 2). It is obvious that a greater increase in living standards should have been possible under the PCW, but the governments failure to make meaningful tax reforms and the intransigence of many employers left workers getting little or no return for their contribution to the economic recovery. IBEC's response to ICTU's paper Managing Change was to insist that "the concept of payment for change is unacceptable in the modern competitive and rapidly changing world" (l4). This is as clear a warning as we should need of the future intentions of the employer side of the 'social partnership'.


Table 2

Increase in Living Standards in relation to Increase in Gross Domestic Product

Programme

Average worker's Increase in Gross living standards

Increase in Domestic Product

PNR from 1988 - 1990

Increase of ave. 1.6% per year

5.9% per year

PESP from 1991-93

Increase of ave. 1.8% per year

2.9% per year

PCW from 1994 to l996

Increase of ave. 1.9% per year

6.5% per year

Based on Life after the PCW - Review and Perspectives, SIPTU Research Department, March 1996.


Taxation, Living Standards and Social Welfare

Manus O'Riordan of SIPTU reviewed the failure of the Government to deliver on the tax reform commitments in the PCW (15) and he pointed out that it was in the final year of the PESP that the 1993 Budget imposed the 1% income levy, and the final year of the PCW when the Budget failed to meet the PCW's commitments on tax reform. In 1994, the first year of the PCW, tax reform accounted for a mere 0.9 %, of the increase in the average worker's take-home pay. In 1995 and 1996, the increase in real terms was a mere 0.4%. The government's performance (or lack of it) in this regard is consistent with the unwillingness of former governments to implement the tax changes promised in previous programmes (See Table 3). In 1987, PAYE workers contributed 80% of all income tax revenue. By 1995, the PAYE sector contributed 87% of all income tax revenue, farmers contributed 1.7% and other self-employed 11.6%. Since 1987, the total PAYE income tax contribution has increased by almost one third, adjusted for inflation. Indirect taxes, (VAT plus Customs and Excise duties) which fall primarily on the working population and unemployed, increased by over 40% in real terms between 1987 and 1996. Average real earnings increased by less than 10% over the same period. (l6).


Table 3

Tax Reform under the PCW

Year

Average worker's take home pay

Other factors affecting increase in take home pay

Tax reform

Change in living standards after inflation and other factors applied

1994

Increase of 4% 1.7% first phase increase

1.4% removal of income levy

0.9%

1.6% growth

1995

Increase of 3.7% 2.1% second phase pay increase

0.7% child benefit increase

1.2% PRSI reform

1.3% growth

1996

Increase of 4.1%

expected 3% third/fourth phase pay increases

0.2% increase in child benefit

. 0.7% PRSI reform

2% growth

0.4% 0.4%

 

Based on Life After the PCW - Review and Perspectives, SIPTU Research Department, March 1996.

 


The PCW's priorities for personal tax reform were stated to be:

(1) alleviating the burden of taxation on workers with low income, particularly those with families;

and

(2) raising the income threshold at which the higher rate comes into play.

In relation to the first goal, the increase in the exemption limit in the 1996 Budget gives a relative improvement to the low paid, but only after a very limited increase in the 1995 Budget and none at all in the 1994 Budget. As a result, "the low paid worker will enter the tax net in 1996 at precisely the same level of real income as he or she did in 1993" (17). In relation to the second priority, the benefit of reduced PRSI payments was eliminated by the abolition of the PRSI tax allowance, so that there has been no alleviation of the position where the top 48% rate of tax applies at very modest levels of income.

Over two successive Budgets the commitment of the PCW to achieve the minimum priority rates recommended by the 1985 Commission on Social Welfare have not been met by the present government. The combined effects of the 1995 and 1996 Budgets have raised social welfare rates by 5.5%, compared to a Consumer Price Index rise of 4.7% during the same two year period. (18). This sounds good but it does not take into account the effect on the Consumer Price Index of the abolition of university fees and reductions in the cost of foreign holidays, from which social welfare recipients receive no benefit. SIPTU's review document says:

... the harsh reality is that the purchasing power of the basic rates of social welfare have improved almost negligibly as a result of this year's as well as last year's Budget, to the extent of a mere 0.3% over the full two year period.

More than ten years after the Commission on Social Welfare's recommendations, the rates of Unemployment Benefit, Disability Benefit and long-term Unemployment Assistance have reached only 95% of the Commission's main priority rate and short-term Unemployment Assistance - together with Supplementary Welfare Allowance rates - have reached only 92% (19). These figures should be seen in relation to IBEC's argument against social welfare increases in the last budget. They claimed that:

... there exists already a most effective minimum wage that provides a strong active disincentive to employment in the value of monetary and non-monetary payments of the social welfare system. The value of the medical card, rent allowance and other sundry allowances is considerable (20).

This, and similar submissions by employers, show that workers and unemployed have nothing to gain from continued one-sided partnership. The annual index of unit wages costs has dropped from 87.9 in 1990 to 72.1 in 1995, while output per person rose from 145.4 in 1990 to 214.1 in 1995.(21)

Next year is the bench-mark year for assessing the criteria for entry into economic and monetary union under the Maastricht agreement. Under its terms, inflation cannot be more than 1.5% and the government is determined to achieve that rate by adopting a cautious approach to monetary and income policies. On the evidence of government and employer statements, it seems that workers and social welfare recipients will be paying the price for Ireland's admission. The Central Bank has urged moderation in public spending while at the same time admitting that Corporation tax revenues for 1995 were substantially below expectations. This was confirmed in the annual report of the Comptroller and Auditor General which showed that £268 million is owed to the Revenue in Corporate tax.

The reality of 'social partnership'

The recent National Economic and Social Council report,(23) prepared for the Government on the value of the partnership agreements, concluded in favour of national agreements but argued for real social partnership in the workplace if the agreements are to be successful. Their definition of 'success' relates to Ireland's record economic growth, which we have already seen has not benefited either the worker or social welfare recipient. Instead of defending our interests, trade union leaders under ICTU's banner want us to become more 'employer friendly'. I don't think I am being unfair in suggesting that many of them are more concerned with protecting their own inflated salaries and conditions than in eliminating the inequalities workers and social welfare recipients have to endure in terms of pay, benefits and taxation.

The PCW has been even more constricting than the forerunning programmes in constraining trade unionists from seeking a fair return for their labour. Moderate wage claims were supposed to be the price of tax and social welfare reform which has not happened. The NESC report advocates the synchronisation of public and private sector pay negotiations. It suggests that the so-called extra job security enjoyed by public sector workers, in addition to better pensions and ancillary conditions, should be reflected in lower pay rates than in the private sector. The authors of the report obviously did not speak to the Health Board workers who are seeking a minimal pension scheme for their part- time colleagues or the civil servants who have been told they should expect to live in a world of budgeting constraints, where extra resources would not be available to fund the improvements demanded of them. A senior civil servant said recently that "public servants would have to achieve more for less, something which others had been doing for years in parts of the commercial semi-states and the private sector" (24). This does not apply to senior civil servants whose salaries have risen significantly in recent years in line with their competitors in senior management in the commercial sector. It seems that supporters of national agreements agree that the future for workers is to reduce everybody to the same low standards, without recourse to adequate trade union protection. How can ICTU claim this is consistent with their primary goal for a new programme:

To permit all employees to develop to their full potential in a work environment that is supportive and protective of all. (25).

This survey of aspects of the performance of the partnership programmes is by no means exhaustive but it is evident from the figures that the partnership has been remarkably one-sided in terms of benefit. The trade union review documents to which I referred are in favour of a new programme with better terms but the statistics they use to justify the performance of the PCW are damning. If this is the best argument they can produce for entering talks on a new agreement, it should make us question what our trade union leaders have to gain by trying to keep us tied to programmes that demand endless concessions from us for little or no return.


Footnotes

(1) SIPTU Research Department Discussion Paper: Life after the PCW: Review and Perspectives. March 1996
(2) Central Bank Bulletin, Spring 1996.
(3) IMPACT conference, May 1996
(4) Central Bank Bulletin
(5) Tony O'Brien, outgoing IBEC President, IR Data Bank 14:336.
(6) Central Statistics Office Bulletin, 1995.
(7) MSF Policy Document, Trade Union strategy after the PCW, 1996. p.1.
(8) Life after the PCW, p.7.
(9) Life after the PCW, p.9.
(10) Dr. Charles Clarke, Professor of Economics at St. John's University, New York and Ms. Catherine Kavanagh, lecturer in Economics at University College Cork.
(11) Irish Times, 18 September 1996. Report on Conference of Religious in Ireland at which I was present
(12) CSO Statistical Bulletin, 1996.
(13) Trade Union Strategy after the PCW, p.4.
(14) IR News 10.
(15) "The Facts on Tax" in Newsline, 23 July 1996, vol7. no.5.
(16) Trade Union Strategy after the PCW, p.2
(17) Life after the PCW, p .4.
(18) Life after the PCW,, p.9.
(19) "The Facts on Tax".
(20) IBEC's pre-Budget submission, 1996. IR Data Bank 14:323.
(21) Central Statistics Office, Economic Series, July 1996.
(22) Central Bank Bulletin,, p.l2.
(23) NESC Report, William K. Roche and Thomas A. Kochan.
(24) Brian Whitney, Assistant Secretary of the Dept. of Enterprise and Employment, in IR Data Bank 14:331.
(25) ICTU, Development of Social Partnership at Company Level- The Options, June 1996