Caretaker government seems surprised that wage demands are coming forward

Having talked up the economic recovery, how can the caretaker government be surprised that wage demands, such as by Luas drivers, are coming forward? asks Seán D Barrett

The facts are clear: The recovery is something most people know from the media and statistical reports but not in their wallets or homeplaces. The posters said ‘Let’s keep the recovery going’ and is it any wonder people want their slice of the recovery? Now, though, having so ardently sold this story to the public, the caretaker government seems surprised that unjustifiable wage demands are coming forward.

While Dublin has experienced a recovery, mostly driven by the multinational sector, the rest of the country still languishes in extremely low growth. The problem for most people is that price levels, though collectively flat- lining, have increased in some crucial areas. This has placed pressures on households above and beyond that of the national recovery programme’s tax increases and wage cuts.

The reality is that certain areas of life have become a lot more expensive. When one breaks down the CSO consumer price index, it is clear that the few places where prices are rising are in education, insurance, and of course, housing.

Insurance is getting dearer because the government continued to bail out dodgy insurance firms and to support a very expensive but lacklustre health system. House prices have risen by 8% year-on-year. In some places this has been as high as 20% per quarter. Rental prices have increased by at least 10% annually, depending on what part of Ireland you’re in. The average worker has seen a significant reduction, some estimates place median post-tax income reductions at 10% from 2007 levels. All told, that means people have less money for some very basic and increasingly costly items such as car and house insurance, their children’s education, and a roof over their heads.

Caretaker government seems surprised that wage demands are coming forward

Where does this fit into the framework of Luas and Dart drivers, teachers, and other public servants that are agitating for pay rises? They are responding to the external conditions around them. Their take-home pay has fallen. The Government keeps sending them letters for new taxes, sometimes accompanied by breath- taking levels of maladministration, and they see the Government will do everything possible to save, defend, and support the banking and financial system, even ensuring its own inquiry into the banking crisis failed to lay a glove on any of the key protagonists. Then they are told to be glad of “the recovery” but not to ask for anything of it since to do so would jeopardise the ability to “keep the recovery going”.

The response is industrial action. An approach to industrial relations reminiscent of the late 1970s and early 80s, with all-night meetings and spite-driven strike actions, has been revived along with the national political instability from the same era.

Ultimately, wages need to reflect productivity. To allow an increase in wages, there must be improved productivity or else that increase in wages will eventually filter into the rest of the market in the form of inflation.

In the situation of non-traded wages, which train drivers, teachers, and civil servants largely represent, the temptation is very strong to increase wages. Multinational employees are globally benchmarked against their counterparts in New York, London, and Tokyo so their traded wages are less subject to the whims of national circumstances. In the past, those in the semi-state and civil/public service employment could rely on copper-fastened employment tenure and robust defined-benefit pensions to compensate for lower current wages but the rules have changed.

The benchmarking process of the boom years accompanied by an auction politics within the ‘partnership’ structure took what was a very credible corporatist model from continental Europe and made it disreputable. The decline in unions, the rise of the precariat, the shift towards a service economy, and, increasingly, an online economy have made the remaining 20th century tools of industrial relations largely obsolete.

Government policies towards affordable housing, stability, and surety for tenants, a financial system that works for the economy instead of the other way around, are more important than negotiation teams realise but ultimately they do not have control of those economic sectors.

Caretaker government seems surprised that wage demands are coming forward

The Dart and Luas drivers want to recover lost ground, they want to see their standard of living stay the same, if not improve, and they want parity with one another. This is a parity that is not sustainable. Irish Rail loses money. To keep running it relies on taxes for you and me. Teachers want parity between the terms and conditions of old and new teachers. That requires tax euros. Ultimately, Ireland can decide to do much of what is requested by the different groups but will require the Irish taxpaying public to pay more taxes. More taxes on current expenditure doesn’t result in a better future. More taxes on investment (rigorously and independently assessed) can yield a higher standard of living down the road.

The industrial disputes of the past month need a move away from 20th century thinking and solutions. They are manifestations of new problems. This is not some old black-and-white drama of capital and labour, of Jim Larkin versus William Martin Murphy, but a new and complex mosaic of concerns, difficulties, and the wages of spin brought about by an exhausted Irish population desiring a better tomorrow and a small-minded elite bent on resuscitating the past. We need to change the rhetoric to know what we should do.

Leadership is the art of getting someone else to do something you want done because they want to do it. It has become clear throughout these past few weeks that such artistry has been sorely absent.

Seán D Barrett taught economics for four decades at Trinity College Dublin; he is an independent member of Seanad Eireann for the University of Dublin; and is a candidate in the upcoming Seanad election.


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