The new national agreement, "Sustaining Progress", endorsed by trade unions and employers yesterday, is very different from recent social partnership arrangements.
It reflects major changes in our economic circumstances and, particularly, in the quality of the Government's finances. It marks a return to an early form of such agreements when pay and working conditions dominated the agenda, to the near-exclusion of social concerns.
As a consequence, the Community Platform, a group representing 26 organisations in the community and voluntary sector, has rejected the proposals. The small firms association, ISME, was highly critical of the pay elements. And representatives of farming organisations are seeking concessions in return for their support. In spite of such limitations, the agreement is to be welcomed as a necessary stabilising influence in society and as a platform for future economic growth.
Provisions to control inflation and to protect the living standards of workers are key elements in the agreement. Wage increases vary considerably between public and private sector workers because of benchmarking arrangements, but a minimum pay increase of seven per cent, phased over 18 months, should compensate for inflation. In addition, an average of 8.9 per cent will be added to public sector pay in the period to June, 2005.
In an effort to moderate inflationary pressures, the Coalition Government has undertaken to introduce greater competition into the economy and to address insurance, legal, medical charges and other matters.
There is no hiding the fact that this is a stop-gap arrangement that may mark the beginning of the end of 16 years of social partnership. Employers and trade unions recognised the need for a new formula some time ago. In the absence of Government tax cuts that guarantee increases in take-home pay for everyone, a one-size-fits-all wage deal becomes extremely difficult to sell.
Declining export markets and profitability will encourage some employers to plead an inability to pay these increases. And trade union militants object to the agreement's system of binding arbitration.
"Sustaining Progress" is scheduled to run for three years and its terms will be implemented from next week. Negotiations on pay for the second 18-month period will begin in 2004. Those talks will be heavily influenced by the state of the world economy at the time. Given the attitude of delegates at yesterday's ICTU conference, there is no certainty a deal will be done.
Representatives of the employers' body, IBEC, were equally unenthusiastic when accepting that the terms of the agreement were the best they were likely to get. They insisted that new, special claims could not be tolerated. And they posited the choice between economic progress and the erosion of business and employment.
The big challenge facing the Government is to ensure that reforms of the public service pay system, advanced as the justification for benchmarking awards, are fully implemented.