Divided, conquered?

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This article was originally published on #CrisisJam.

Since the foundation of the Irish state, trade unions have had to strategise with successive centre-right Fianna Fáil and Fine Gael governments. Despite the formal association between the Irish Labour party and some trade unions, it is Fianna Fáil that most trade union members have traditionally voted for. Fianna Fáil, in recognition of this, has historically kept up a close but informal relationship with the trade union movement. This relationship began with Sean Lemass and continued right up through the reign of Bertie Ahern (who was a member of the Workers Union of Ireland). Irish state involvement in industrial relations began with the establishment of the Labour Court in 1946. This remains the cornerstone of our industrial relations system. It has overseen the coordination of wage bargaining and labour relations since the ‘national agreements’ in the 1960s, the ‘national understandings’ in the 1970s and ‘social partnership agreements’ since 1987.

The central question guiding the political strategy of Irish trade unions has been whether to enter centralised wage bargains (facilitated by centre right governments) at national level or opt for free-for-all bargaining at enterprise level. The conditioning factors for this strategy have been economic context, trade union density and the institutional framework of a voluntarist (as opposed to legalist) industrial relations regime. It is within this context of strategising over centralised wage bargaining, facilitated by the state, that the future of trade unionism and social partnership must be viewed. Social partnership was a strategy that enabled trade unions to influence cabinet government in the absence of a strong labour party. However, the bargain struck was not wage restraint for an increase in the social wage, rather it was aimed at increasing the disposable income of trade union members primarily through reducing income tax to increase net pay.

What is social partnership?

There has always been, and continues to be, a definitional problem with social partnership. Social partnership as a concept is borrowed from the co-determined industrial relations systems of Europe. It implies, and assumes, that the economic actors involved are equal in their influence and bargaining power. This is not the case in Ireland, where the co-determination of public policy as witnessed in the economic councils of Netherlands, Germany, Slovenia, Finland and Sweden does not exist. For the purpose of this article, therefore, I use social partnership to refer to a system of centralised wage bargaining that involves a series of trade offs for the economic actors involved. For trade unions, it is a political strategy that on the one hand gives them direct access to cabinet government (sometimes influential but predominately consultative) whilst simultaneously negotiating national income agreements with employers and government.

Prior to the first social partnership agreement in 1987 there was period of free for all wage bargaining (at enterprise level). In this period, trade unions negotiated wage increases of up to 70 per cent. Despite this, take home pay decreased by almost 10 per cent due to excessive forms of PAYE taxation. When Fianna Fáil entered government in 1987 they offered unions a deal that would involve wage restraint (2 per cent over three years) in return for a reduction in income tax, as well as active measures to create employment. This led to the first national partnership agreement in the Programme for National Recovery. This was the beginning of 23 years of national wage agreements covering the unionised sectors of the economy. Social partnership became the institutional framework to settle distributive conflict in the wage-labour relation. When the first national agreement was signed in 1987 the percentage of the workforce in a trade union was approx 55 per cent. In 2010 this density had reduced to less than 35 per cent. In the private sector it has dropped to approximately 20 per cent.

What is trade union density?

Trade union density is the number of workers who are members of a trade union as a percentage of the overall workforce. Across the western world trade union density has been in decline. In Ireland overall density in has in recent years fallen sharply. It peaked around 1980 at 62 per cent of the workforce. Throughout the 1980s trade union density averaged around 52 per cent. But membership declined steadily through the recessionary period. In 1998 trade union density had dropped to around 45 per cent.

The decline in density can be attributed to the rapidly changing structure and expansion of the Irish labour market. New foreign owned firms were being set up (with the US firms explicitly non-union); employment in the private services industry grew at a rapid pace, and there was a huge growth in managerial occupations. Getting organised in Intel, Google or Microsoft was ruled out before they even entered the Irish labour market. Getting workers in cafes, shops and small firms (with high turnover and often less than 20 people employed) proved difficult. Inducing managers and high salaried employees into a union as opposed to professional associations was also problematic. By 2005 trade union density was hovering around 40 per cent. It is currently estimated to be around 35 per cent. Tackling this decline in density and organising workers in the private sector is the most significant challenge facing the trade union movement.

Why does it matter?

Trade union density in a voluntarist industrial relations system is significantly important as it reflects the collective bargaining power of workers in an economy. Collective bargaining is the percentage of the workforce covered by negotiated trade union wage agreements. Those who are not covered by collective bargaining have their wages (and conditions) set by the ebb and flow of free market competition. But, more importantly, the fewer workers in a union, the less power trade unions have to influence the political agenda. Trade union density is a reflection of the power base of labour in its relationship to capital. Collective bargaining coverage in Ireland is approx 44 per cent. That is, only 44 per cent of workers have their pay and conditions negotiated through collective bargaining. For the remainder, these conditions are decided by employers in response to market competition. This can often lead to higher wage increases, particularly in higher skilled occupations. Thus, trade union density and collective bargaining matters because it determines the power resources available to organised labour in a capitalist economy.

In effect, Ireland has four different economies. The first is domestic owned manufacturing industry. These tend to be relatively well organised but in rapid decline. The second is the public sector, and is made up of a significant number of professional occupations. This public sector economy also includes semi-state and previously state owned companies such as SR Technics and Aer Lingus. The state service sector is highly organised and strategically important and has a trade union density of around 80 per cent. The third economy is the highly productive, export oriented, foreign owned sector – i.e. high tech manufacturing and pharmaceutical companies. These are generally non-union and tend to remunerate their employees significantly above the national wage agreements. The fourth economy includes small and medium sized enterprises, which between them employ well over 500,000 workers in the domestic economy. These tend to be service oriented and often employ less than 20 people. These latter non-union categories are where most jobs have been created over the past 20 years and the most precarious type of employment in the contemporary labour market across Europe.

What workers are represented by trade unions?

Professional and technical occupations in the public sector are the most highly unionised groups in the Irish economy. In the rest of Europe, with long traditions of industrial development, the concentration has tended to be amongst the manufacturing class, who in turn tend to vote for left oriented political parties. Density, in Ireland, is concentrated in higher occupation groups. In broad terms, the public sector is the most densely unionised (over 80 per cent) while across the private sector union density hovers at just 20 per cent.

In terms of representation, the most worrying trend for the trade union movement is the decline in membership amongst three particular categories of workers (often intertwined): young people, part time workers and the lower skilled. Traditionally the wages of those in low paid sectors such as catering, hotels and construction were set by the Labour court. The minimum wage agreements are coordinated by Joint Labour Committees (JLCs) and are called Registered Employment Agreements (REAs). These legal agreements are now under significant attack by sectoral employer bodies such as the Hotels Federation, the Small Firms Association and IBEC. Given the policy constraints of the EMU we are now being told that the only way to improve the economy is through competitiveness. In effect, this means a reduction in labour costs.

What about the policy constraint of the EMU?

The EMU is designed for a symmetric pan-European economy but operates in an asymmetric way. Given that each country cannot adjust their exchange rates or devalue their currency all of the adjustment must fall on labour market, wage and fiscal policy. In practice, this amounts to a collective pay cut (often euphemistically described as internal wage devaluation). When the crisis emerged in 2008, each European country responded differently. Some countries decided to extend the legal framework of short term working. To reduce labour costs most European countries decided to either increase productivity or reduce working time. The rationale behind these policies was to ensure employment was maintained. It was to encourage employers to use redundancy as a last option not a first option. Unemployment levels were kept quite low.

In Ireland, the opposite occurred. Employers in the private sector opted to cut jobs to tackle labour costs. This was made possible by a flexible labour market. To explain this difference we have to examine the institutional framework of collective bargaining. In the eurozone, 70 per cent of workers are covered by negotiated agreements. That is, their pay and conditions are set through collective negotiation and not the market. In most Eurozone countries wage agreements are legally extendable to all workers in the economy regardless of trade union density. Furthermore, density is inclusive, meaning that it is not tied to one particular sector of the economy. In this regard, country specific regimes of collective bargaining are the most important variable in accounting for the diversity of responses to the economic crisis across Europe. This is because institutions of collective bargaining (trade union density and bargaining coverage) provide organised labour with significant deterrent power in the labour market. They provide employees and organised labour with a strategic buffer against the worst excesses of market based adjustments. An internal devaluation was so easy in Ireland (and in Eastern Europe) because trade unions lack sufficient economic deterrent power in the labour market, despite 23 years of national partnership agreements.

What is the future – the organising union?

Trade unions will continue to want access to the policy making apparatus of government. In this regard they will adopt whatever collective strategies available to that end. But, strategic capacity requires strengthening the position of labour in its relationship to capital. Political power is dependent upon economic power. In a voluntarist system, where wage agreements are not legally extendable to the entire economy the only way to do this is through organisation; to increase trade union density and collective bargaining coverage. Making this a priority should be the overarching strategic objective of trade unions in the coming years. It requires a move away from simply servicing the immediate wage interests of their members to actively engaging in a long term political strategy aimed at developing a counter-power at firm and sectoral level in the economy. The first step in this regard is to rapidly improve and popularise an alternative political-economic analysis of the type of society the Irish labour movement envisages for the 21st century.

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5 Responses

  1. bob hall

    February 16, 2011 9:54 am

    I am confused about the public sector members and the reference to S.R.Technics, is it not a fact that this company has closed its operation at Dublin Airport ?.If so how can they be included in this article ?.

  2. Aidan R

    February 16, 2011 10:26 am

    It states ‘previously owned’ making reference to a declining set of industries. The original article makes reference to Waterford Crystal as well. The point being domestic unionised companies are in decline.

  3. Small Girl

    February 21, 2011 8:52 pm

    Hi Aidan, sorry I’m late in joining in.

    I’m interested in the minimum wage. Apart from my sympathy for anyone trying to live on it, I wonder how it affects pay overall. Do you see the recent lowering of it solely as government giving into the hotel/restaurant/IBEC/American Chamber of Commerce lobby in order to keep businesses going in recessionary times? Or is there an across the board agenda, as many trade unionists would have it, to lower wages in all industries and make Ireland look a little more attractive for FDI or any investment for that matter?

    Bear with me, you wrote that collective bargaining coverage in Ireland is approx 44 per cent or 44% of workers have their pay and conditions negotiated through collective bargaining. In Ireland union density is in the public sector so is the majority of this 44% centralised pay bargaining rather than collective bargaining? In this regard it’s surely difficult for unions to protect the minimum wage standard as min wage is paid in the private sector where density is low and unions are primarily bargaining for the public sector. And as min wage is the legal/quasi-legal measurement of the basic unit of pay for labour in any economy surely unions should do better on this in Ireland. SIPTU moved to an organising model in 2004 (according to Wikipedia) but I think that was in response to migrant workers entering the country and being paid less than their Irish counterparts. A good many of these workers have returned home I presume.

    You’d know more about this than I would but we do not have the right to collective bargaining enshrined in law here and as the Department of Enterprise, Trade & Innovation (esp. the Minister for Labour Affairs) attends the ILO meetings whenever they’re on (every 4 years maybe) there is an opportunity here for our trade union movement to address our government about certain issues in front of their international peers.

    Maybe unions need a few carrots and sticks like how can ILO conventions be useful for workers in a voluntarist system such as ours.

    Great article and it’s refreshing to read something abour the trade union movement that isn’t about labour history or how trade unions could be leading a revolt but aren’t. Especially in the current context.

    Do you have anything else written on trade unions?

  4. Aidan R

    March 4, 2011 1:28 pm

    @ small girl

    The across the board agenda of cutting wages that trade unionists refer to is the same thing economists refer to when they argue we need to improve competitivness. In the absence of a currency devaluation the emphasis is cutting labour costs. But, there are a variety of ways to cut labour costs – wages bing just one. Thus, I dont think it is as simple as one big conspiracy to cut wages by employers. It varies by sector. You wont here big MNCs talking about cutting wages to save costs. They emphasise increased productivity. It is the labour intensive domestic economy with poor management that tend to focus on cutting wages in a down turn.

    I have more material. Just fling me an email and I will forward it on to you. You will find it on my blog.

  5. Small Girl

    March 4, 2011 4:07 pm

    Thanks Aidan, I clicked on your name and your blog came up. Looks good. I’ll check it out as soon as I can.