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DE RUEHDL #0356/01 0941619
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R 041619Z APR 06
FM AMEMBASSY DUBLIN
TO SECSTATE WASHDC 6733

UNCLAS DUBLIN 000356 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ELAB EI
SUBJECT: IRELAND STICKS TO "SOCIAL PARTNERSHIP" ON 
NATIONAL WAGE TALKS 
 
 
¶1. Summary:  Biannual negotiations on a new national wage 
 
 
agreement are underway among labor, employers and the 
Government, the so-called "Social Partnership" process 
that has underpinned Ireland's past economic success, but 
which some commentators increasingly view as 
anachronistic.  The agreement would establish non-legally 
binding but morally authoritative benchmarks for pay 
increases and would also set out consensus positions on 
wide-ranging social policies.  Labor market reform, the 
demands of globalization, protection for migrant workers, 
the provision of quality public services, and a time 
frame for the agreement are key issues that the Social 
Partners hope to reconcile by Easter.  Discussions are 
currently focused on employment standards, with employers 
opposing union demands for new employment laws to 
underpin workers' pay and conditions, including for 
immigrant workers.  Whereas past Social Partnership 
agreements delivered the industrial peace that made 
Ireland an attractive investment destination, some 
economists believe that the process is now ill-suited to 
a healthy, market-led economy.  The partnership process 
nevertheless retains its relevance for its 
psychologically reassuring message that Ireland is a 
country of consensus and a good place for business. 
Politically, a general election is expected by May 2007, 
and the Government hopes to finalize an agreement in 
order to brandish its electoral credentials, to build 
support among employers and labor, and to remove possible 
distractions from the campaign.  End Summary 
 
 
Social Partnership Talks Underway 
--------------------------------- 
 
¶2.   Discussions have been underway for over a month to 
extend the 18-year-old "Social Partnership" process, a 
series of agreements between the Government, employers 
and trade unions - the Social Partners - dating back to 
the 1980s.  These agreements establish non-legally 
binding but morally authoritative benchmarks for pay 
increases in both the public and private sector, and 
embody a consensus approach to a wide range of social 
policies, such as healthcare and pensions.  The talks, 
due to begin in November 2005, were deferred by the Irish 
Congress of Trade Unions (ICTU) over plans by an Irish 
ferries firm to replace its workers with foreign 
nationals earning half the Irish minimum wage.  The 
dispute was resolved following nationwide protests 
organized by ICTU on December 9, in which roughly 
100,0000 people took part.  Discussions are currently 
focused on employment standards, with employers opposing 
union demands for new employment laws to underpin 
workers' pay and conditions, including for immigrant 
workers.  The talks were to conclude by Saint Patrick's 
Day (March 17), but the participants hope now to finalize 
an agreement by Easter, just before the annual 
conferences of several larger unions, particularly the 
teachers' unions. 
 
 
What is Social Partnership? 
--------------------------- 
 
¶3.   Social Partnership was born in 1987, when the 
Government convened meetings among trade unions, 
employers, and farmers that led to a three-year 
"Programme for National Recovery," the first Social 
Partnership agreement.  At the time, the country faced 
significant problems, such as excessive national debt 
(debt to GNP ratio of 150 percent), high unemployment (17 
percent) and high levels of emigration (40,000 per 
annum).  In the bargain reached in the first partnership 
talks, labor agreed to accept limits on wage increases 
and on recourse to industrial action in exchange for 
government guarantees of accessible health care, 
affordable housing, and lower personal tax rates.  Five 
successive Social Partnership programs have maintained 
the outlines of the basic bargain.  The latest agreement, 
"Sustaining Progress" (2003 - 2005), called for a seven 
percent private sector pay increase over 18 months, a 
minimum wage of seven euro per hour, and improved 
redundancy pay terms. 
 
 
Contribution to Ireland's Success 
--------------------------------- 
 
¶4.   The Social Partnership approach helped to deliver 
Ireland's recovery from the disastrous early and mid- 
1980s and has underpinned, through labor market 
stability, a sustained period of growth since.  The 
partnership agreements put a brake on wage increases and 
brought down inflation, which facilitated Ireland's 
 
successful participation in the Exchange Rate Mechanism 
 
 
(ERM) and transition to European Monetary Union (EMU). 
By moderating wages and securing industrial peace (an 
average of 317,000 days per annum were lost through 
industrial disputes in the 1980s, compared with 21,000 
days in 2004), Social Partnership also made Ireland 
competitive as a destination for foreign direct 
investment (FDI), particularly U.S. FDI in the 
pharmaceuticals, IT, and financial services sectors.  (A 
young, educated, English-speaking workforce and favorable 
corporate tax rates also helped to attract such 
investment.) 
 
 
What the Trade Unions Want 
-------------------------- 
 
¶5.   In the current Social Partnership negotiations, the 
Irish Congress of Trade Unions (ICTU), which represents 
57 unions, has called for a six-year agreement, with a 
wage review to take place every two years.  Paul Sweeney, 
ICTU's economic advisor, recently told Emboffs that 
labor's main areas of concern are labor market reform and 
maintenance of employment standards.  Sweeney cited the 
Irish ferries dispute as having exposed a culture of 
abuse and exploitation of immigrant workers, who now 
account for over eight percent of the Irish workforce. 
ICTU is pressing for an Independent Labor Inspectorate, 
on the premise that keeping the existing inspectorate in 
the Department of Enterprise, Trade and Employment (the 
ministry representing Irish business interests) 
represents a conflict of interest.  ICTU is also looking 
for wage increases of at least four percent, but Sweeney 
emphasized that the process was not just about wages.  In 
that case, he explained, labor might be able to achieve 
better wage terms through direct negotiations with 
employers and through recourse to strikes.  Rather, ICTU 
views the partnership process as a platform where unions 
can also shape broader social policies, such as pension 
reform, healthcare, childcare, and education. 
 
 
What Employers Want 
------------------- 
 
¶6.   The Irish Business and Employers Confederation 
(IBEC), representing the employer and business community, 
is focused on managing the threats and opportunities of 
increased globalization and the provision of quality 
public services.  IBEC's Director of Economic Policy, 
Danny McCoy, told Emboffs that public sector pay 
increases were the major issue in the talks, noting that 
previous agreements gave the public sector 
disproportionate increases.  For example "Sustaining 
Progress" called for an average pay increase of 8.9 
percent across the public service, compared to 7.0 
percent for the private sector.  (Irish economists concur 
that a recent rise in inflation above 3 percent is tied 
to public sector wage increases, which feed through to 
the costs of public services.)  For employers, said 
McCoy, the partnership process must produce an agreement 
that maintains labor market/workplace flexibility, 
ensures effective investment in infrastructure, and 
assists businesses with R&D and worker training.  IBEC 
also disputes the unions' argument that newly arrived 
immigrant workers are displacing Irish laborers and 
exerting downward pressure on wages.  McCoy views the 
partnership process as a "dinosaur," but a necessary one 
to preserve the feeling of economic consensus. 
 
 
The Government Angle 
-------------------- 
 
¶7.   The Government negotiators, led by Dermot McCarthy, 
Secretary General in the office of the Prime Minister and 
 
SIPDIS 
overall chair of the process, have called on the Social 
Partners to agree to a ten-year framework for the 
process, with a wage review every two years.  The idea is 
to align an agreement with the Government's longer-term 
budgetary spending programs aimed at developing a more 
dynamic, innovation-based economy.  McCarthy takes his 
lead from Prime Minister Bertie Ahern, who views the 
partnership process as vital to sustaining Ireland's hard- 
won economic achievements.  Ahern has been instrumental 
in previous partnership negotiations, as Minister for 
Labor in 1987 and Prime Minister since 1997.  (Comment: 
Most commentators see Ahern as leaning in favor of union 
interests in the negotiations, as his parliamentary 
constituents in North Dublin are primarily blue-collar 
workers.) 
 
Comment: Does Ireland Need an Agreement? 
 
 
---------------------------------------- 
 
¶8.  Consensus and good faith are the keys to Social 
Partnership, and each side in the process has, for the 
most part, honored commitments in previous agreements. 
Employers have given a greater commitment in areas such 
as training, childcare, and a flexible working 
environment.  Trade unions, while protecting the 
interests of their members, have worked more closely with 
employers in both the private and public sectors to 
deliver higher productivity and enhanced quality of 
service.  Government has delivered on a measurable 
increase in the provision of infrastructure and public 
services such as health and education, while increasing 
the living standards of disadvantaged groups. 
 
¶9. The question increasingly posed by commentators, 
however, is, "does Ireland need a partnership process in 
the current economic climate?"  In one sense, the 
question is moot, as none of the Social Partners has 
indicated any intention of abandoning the process. 
Significant changes in Ireland since 1987, when Social 
Partnership was necessary to redress serious economic 
hardships, nevertheless make the question legitimate. 
The Ireland of 2006, with full employment, low inflation, 
and steady growth, is a healthy economy, where labor and 
business presumably could work out the terms of 
employment through direct negotiations.  Moreover, the 
original rationale for the process - moderating wage 
growth to make Ireland a more competitive FDI destination 
- is somewhat outmoded, since the country can no longer 
compete with such FDI magnets as India and China purely 
on wages.  Social Partnership nevertheless retains its 
relevance, in part because employers value the certainty 
associated with industrial peace and pre-determined pay 
increases, while the unions maintain a degree of 
influence beyond what might be achievable at a time of 
falling union membership in the private sector (now 
roughly 30 percent).  To a larger extent, as IBEC's Danny 
McCoy suggested, the process remains important simply for 
its reassuring psychological message that Ireland is a 
country of consensus and a good place for business.  This 
reassurance is one of numerous factors, including a low 
corporate tax rate and an educated workforce, that have 
sustained Ireland's economic performance and 
competitiveness in recent years. 
KENNY