Paschal is talking tough with unions – but he’ll likely back down in the end
AGOVERNMENT facing an election year should only make bets on nearto-sure things.
Which gives the public sector trade unions a potentially strong hand in the poker involved in the pay talks due to resume after Thursday morning’s breakdown, when they rejected the €2.9billion in extra pay offered to the country’s 385,000 State employees, civil and public servants. Political reality implies a deal will be done over the next week or so on more favourable terms to the workers – and at additional annual cost to the State that could run to another €1billion or so. What’s a billion or two between friends?
Many of the 19 trade unions represented at the talks are considering ballots of members over industrial action, including strikes and overtime bans, although they will wait until after there have been more talks at the Workplace Relations Commission before they take that option. The offer of an 8.5% pay rise over twoand-a-half years – 12% in the case of the more lowly paid workers – is not considered good enough by them. The unions want 12.5% as the base instead.
Crucial
The idea of strikes that take nurses out of hospitals, teachers out of schools, social workers out of the community and stop or delay payments of social welfare entitlements must put a frightener on the Government.
The local and European elections in June are likely to be difficult enough for the Coalition partners – what with housing, health and immigration still hot-button topics – without adding in anger about the loss of services provided by public employees to the mix. Outrage among public servants at not getting the extra money they want might not have dissipated by general election time – whenever that is – either.
Here’s the rub, however: the jobs in the public sector remain important – crucial in some sectors – but as a voting bloc the public sector workers don’t have quite the same power they once had. The country has more people at work than it has ever had – about 2.4million people, the vast majority in the private sector, which used to not be the case when the country was much poorer.
Many of those private sector employees have little or no chance of receiving pay improvements of 8 to 12% over the next two years, notwithstanding the increase in the minimum wage that came into force on January 1. Indeed, some people in the private sector – especially in the hospitality industry and the more lucrative tech sector – have reason to fear for their jobs, something that is not a concern for secure public sector workers.
Still, it would be quite the gamble for Paschal Donohoe, as Minister for Public Expenditure, to dig in and say he is not improving the offer rejected by the unions, on the basis that it would not be fair to those working in the private sector and unpopular with them.
Pitting the private and public sector workers against each other is something that makes the unions very angry, even if comparisons on wages, working conditions, pensions and job security are valid and worthwhile.
Donohoe has a problem, though, in making any more concessions, one that comes with a lot of history attached. Any extra pay he agrees is a permanent commitment by the Exchequer. The hard cash must come from the Government’s financial resources each year.
It’s reckoned that each extra 1% increase in pay he may offer next week to buy peace will cost about €250million annually to the State. That may be acceptable when the country is running large Exchequer surpluses, brought about by the enormous corporation tax revenues provided by a small number of big companies in the private sector.
Evidence
But there is ample evidence to suggest that the days of €20billion-plus takes in corporate tax will not last more than another few years at best. Making permanent pay arrangements on the back of a temporary boost in revenues is not good economics.
We have been here before. The last tax boom, during the era of the Celtic Tiger, albeit built on short-lived property taxes, gave rise not just to personal tax cuts for all workers but big pay increases in the public sector.
While the State’s finances collapsed – because of reduced revenues and increased safety-net spending – it was necessary to restructure the size of the public service (albeit through not filling posts rather than redundancies), to try to bring pay and pensions down to more affordable levels.
All that work – difficult as it was – is now in danger of being undone, as we have a bigger, more expensive public service than ever before. We have a public sector pay bill of around €24billion, or €28billion once pensions are included. That’s more than we take in corporation taxes.
The Government is also entitled to worry about overall pay rates in the economy, if private sector employees seek the same deals as given to the public sector.
Some employers will pay up and more, which is good for their employees, but others will not do as well, leading to further resentment. Big pay increases could also undo much of the pain taken over the last year in trying to curb inflation.
Inflation is the big issue causing this mini-crisis. The cost of living has gone up dramatically, especially for those families with little or no disposable cash, who have struggled with food shopping bills and lighting and heating costs that have gone up far more than the overall headline inflation figure.
Not unreasonably, because the unions must do their bit for members, it has been pointed out that pay increases for public servants in recent years were far lower than the rate of inflation, meaning that standards of living have dropped.
On the other hand, the Government has been able to argue that these workers benefited from once-off cost-of-living payments, such as €600 against electricity bills last year and €450 this year, as well as tax cuts and reductions in excise on motor fuel.
Argument
Nor is it buying the argument that low pay is dissuading people from taking up key posts in the public service, where there are many vacancies, with Donohoe pointing out that there has been a dramatic increase in numbers employed in recent years, especially in health. Whatever about the vacancies, many jobs were filled by people more than happy with the terms and conditions on offer.
It’s a complicated one but if Donohoe is to give way on additional pay, he should perhaps insert some extra conditions.
The problem is that many of the modern ideas he should be implementing might involve job losses, especially if artificial intelligence is applied to a reform and improvement of the delivery of public services. Whatever about the need for frontline staff such as nurses and teachers, of whom we need many more, think of all the administrative and processing jobs that could be eliminated by the productive use of modern technologies.
That is the joker in the pack but you can be almost certain that it won’t be played. The game is rigged and the outcome certain. Whatever you hear about the talks ‘teetering on a knife-edge’ in the coming days, or other such clichés, be sure that a deal will be done – and it will favour the unions, because in the end that is better for the Government too.