Irish State will find it hard to turn its back on workers’ pay demands

A century ago, many ladies could hardly breath, what with those terrible tight corsets, writes Kyran Fitzgerald.

Since the onset of the financial crisis and the enactment of the so-called Fempi Act (Financial Emergency Measures in the Public Interest Act), resulting in the imposition of two to three rounds of pay cuts for public service workers, our State employees have been left with that choking feeling.

Incomes across the State have been battered, with negative consequences for retail spending. Over the past two years, the economy has embarked on a gradual recovery, with growth of 4% last year and similar progress expected in 2015. As a 3% deficit target approaches, thoughts among the public-service unions have increasingly turned to the question of pay restoration.

In this recovery, highly skilled jobs are leading the way, with some decent crumbs falling off the table for those in a variety of other service occupations ranging from restaurants to IT support functions. Various bodies are reporting upward movement in pay across an increasingly wide range of private-sector positions.

Hays Ireland, in a survey of almost 3,000 employers, says 76% of employers plan to increase headcount this year while more than 54% of employees are expecting a pay rise, 48% a bonus. The labour market appears to be tightening: 58% plan to move jobs in the next year. The pendulum is swinging the way of the employee, it seems. “Employees now seek work packages that emphasise time away from the office over job security and work environment,” Hays says.

Ibec reports that 57% of companies plan to increase basic pay in 2015. Last year, almost half increased pay, with just 1% implementing a reduction. The increases being sanctioned, however, remain modest, between 2% and 3%, according to Impact general secretary Shay Cody.

According to last month’s Industrial Relations News/CIPD survey, some 45% of firms are planning an increase in pay, with an average rise of 2.8% for all companies dropping to 2.2% for manufacturing and just 1.8% in retail and distribution where the fight for custom remains fierce.

IRN editor Brian Sheehan points to the fact that last year just one third of employers planned to increase pay. However, 45% actually did so. A similar shift this year would see the Ibec projection matched, if not exceeded.

Recoveries, like downturns, tend to have a momentum of their own. They can, however, be double-edged swords. Many lower-paid workers are bearing the brunt of the sharp increase in rental costs, a rise which is putting added pressure on union leaders.

The Government, and indeed Ibec, have accepted that some degree of pay restoration for public employees must be countenanced. However, there is some nervousness that the expectations of workers may have moved well ahead of reality.

Dampening such expectation could be a challenge, not least to a union leadership which does not wish to cop the blame for an upsurge in industrial-relations difficulty following a long period of relative peace and co-operation.

The coalition parties must dread the prospect of facing the electorate amid a gathering bevvy of demands from State employees aroused from the graveyard peace of the recession years.

The Government is coping with competing demands from various interest groups, all with a strong story to tell. Fine Gael, in particular, will want to be able to offer a few more tax goodies to its natural supporters, some of whom could be tempted by new kids on the block such as Lucinda Creighton’s Renua Ireland party.

Economists point to the neglect of key areas of investment. Current spending is down 9.4% on peak, whereas capital spending is off by a hefty 52.7%, according to Robert Watt, secretary general of the Department of Public Expenditure and Reform. However, the public pay bill has dropped by one fifth since 2009, from €17.5bn to below €14bn, with staff levels off by 10%.

The belt is finally being loosened as recovery gathers steam and the general election approaches: The Government has just announced the recruitment of 250 extra gardaí, a nice little Easter egg presented by a nervous minister to the Association of Garda Sergeants and Inspectors conference.

The Merrion Street brigade are keen to calm expectations.

Oonagh Buckley, the assistant secretary at the Department of Public Expenditure and Reform, insisted at the recent IRN conference that “Ireland remains very fragile fiscally”. However, she acknowledged that “stresses are starting to come through” as public servants watch on while private-sector neighbours benefit from two to three years’ of increases.

Ibec director general Danny McCoy, speaking at the same conference, said that “we need to come back to the Haddington Road agreement sooner or later”. In fact, the process of revisiting the public-sector pay deal is already under way.

Public Expenditure and Reform Minister Brendan Howlin and his officials have been sounding out the unions. Howlin and Buckley have warned that an agreement between the parties cannot be assumed. There will be no ‘Big Bang reversal’ of the Fempi cuts. It seems full restoration is a process that will require a couple of bites of the cherry, if not more. Serious talks can be expected to kick off once the latest quarterly exchequer returns are in. A key target will be the conclusion of a deal before the pre-budget estimates start coming in at the end of the summer.

The public-service unions are divided as to how the process of restoration should unfold.

The Civil Public and Services Union is keen on a flat-rate increase, launching a campaign with this aim in mind. Unions representing those up the scale tend to favour percentage increases.

Shay Cody of Impact insists his union will take into consideration both equity and affordability.

Meanwhile, Howlin has made a commitment to restore cuts to public servants on over €65,000 a year by early 2018. This group suffered three reductions, not two.

Added into the mix are the public-service pensioners who were also hit with cuts for the first time. The State pensioners have formed their own association to press their case. Howlin has indicated that the pension restoration demands will be dealt with in tandem with the pay demands. As the public service loosens its belts and corsets, the taxpayer will be hoping that by the time they enter the room, the chocolate eggs will not all have been guzzled.