Talks are about to get underway on pay increases for the second phase of the national agreement, Sustaining Progress.
Already employers and the trade unions are staking out their territory. The talks will commence against the difficult backdrop of industrial action at An Post and tensions in Aer Rianta and CIÉ, which almost led to stoppages last week. It adds up to a challenging period for the partnership process which has served the economy well in recent years, but needs to be adapted if it is to be relevant in changing economic times.
The pay talks will be difficult. The employers, through IBEC, are arguing that pay increases will have to fall significantly below the first phase of the agreement, which delivered 7 per cent for the first year and a half of Sustaining Progress. Not surprisingly, the trade unions take a different view, arguing that employees are entitled to share in the fruits of a pick-up in economic growth. The Government, meanwhile, will be pressed by the unions on how its tax policy will affect their members.
It is too early to say whether agreement is likely. As ever, compromise will be required by both employers and unions. However for a deal to be struck, the Government will also have a central role. If basic pay increases are to be moderate, in line with low inflation, then the unions will be understandably nervous that they could be eroded by increases in indirect taxes, higher users' charges or rising utility costs. Employers, struggling to remain competitive, will also want assurances that they will not be hit by higher charges.
There is also a wider economic interest which must be served by the outcome of the talks and it is here that the partnership process faces a difficult challenge. The process must protect jobs and foster continued growth in employment. This means it must underpin competitiveness by avoiding a sharp increase in the cost of conducting business in the Republic. Unfortunately, the cost of living here is now at the upper end of the EU league and the new agreement must not interrupt the current movement of inflation here towards the lower rates of our EU partners. Achieving an outcome which protects competitiveness while at the same time offering employees some increase in their standard of living will challenge all the participants. But given the benign inflation outlook, it should not be an impossible task.
Partnership is also struggling to come to terms with industrial conflict in state companies. It is essential that it succeeds. Industrial peace and the provision of a forum for solving thorny issues have been a key benefit of the partnership process. If public services are periodically threatened - and sometimes disrupted - then the public will understandably question the benefits of national agreements. Partnership helped to solve the public finance crisis of the late 1980s. And it worked during the years of strong growth, when there was plenty of largesse to go around. Now, however, it must prove its worth as the economy faces more complex challenges.