Duffy-Walsh Report on JLCs-REAs

The report commission by the government on Joint Labour Committees and Registered Employment Agreements (written by Kevin Duffy, the Chairman of the Labour Court and UCD economist Frank Walsh) is available here. A press release from the government is available here.

30 thoughts on “Duffy-Walsh Report on JLCs-REAs”

  1. The report says lowering the basic wage rates set under joint labour committees is “unlikely to have a substantial effect on employment.”

    Bruton says “businesses are competing directly with the UK market where wages are 25-30% lower in these sectors; while rates of pay in the sectors covered by the JLCs have increased much faster than the National Minimum Wage, in some cases by more than 20%.”

    The authors say there are not ‘substantial’ differentials but “there are potentially substantial competitive gains that could be realised in some of the affected sectors by reforming the structure of decision making.”

    It would be unfair to target low paid workers while many in the public sector directly and recipients of various public fees in the private sector, are earning at excessive levels. However, I wonder if the view of the authors reflects a public sector mindset.

    A miracle is required to have a ‘substantial’ impact on employment.

  2. Find it odd they used the chairman (ex Sec-Gen of BATU and ICTU) of the LC as one of the report writers.

    It would have been better to remove any question of partiality, maybe bring a non-Irish academic/specialist instead. A report critical of the JLC/REAs would in effect be critical of the court itself.

  3. A recent report from TASC showed how labour costs in the hospitality sector in Ireland are below the EU-15 average and equal to those of Italy (not a high wage country). Labour costs are more relevant than wages to employers, as they include PRSI. So the international comparison argument is bunk.

    If lower paid workers were to benefit from higher employment due to the wage cut we would need a 1% wage cut leading to a 1% increase in employment. Wages account for less than 25% of output in the hospitality sector (there is wide variation in Europe on this figure, but Ireland is more or less in the middle). So even if all the wage cut was passed onto customers (very unlikely) a 1% wage cut would mean 0.25% lower prices.

    To boost employment we would need a demand elasticity of at least 4 (hugely unrealistic) and restaurants would have to be operating at full labour capacity (not very realistic in a recession). More realistic is that any increase in demand would be absorbed by current capacity, no need to increase employment, and that the price elasticity of demand is far below 4.

    And of course all this is ignoring the effects on aggregate demand. Diverting income from the lowest paid to hotel owners will further reduce demand in the economy.

    And lets not forget the NERA report which shows that only about 20% of investigated firms were compliant with the rules.

  4. Next part of consultation, including interaction with social partners, to conlude by 10 June, that is in less then 3 weeks.

    Attaboy Richard. Attaboy Ajai.

  5. Interesting report to read. I noticed the extreme level of bias towards a collective bargaining mindset, and in particular the section on how most of IBEC’s representatives were simply going to refuse collective bargaining in the event of a change. One of the reasons (pp33-35) given for the recommendation to change the structure is the assumption that employee relations would simply break down in the event of renegotiation, because of the outright denial of collective bargaining structures in some workplaces. However I don’t think would actually happen: workers who are refused representation simply tend to go on regardless, and often make individual representations that challenge the fairness/unfairness of management decisions. It makes little sense to suggest that there would be outright collective chaos in the event of a removal of JLCs AND a refusal to engage in collective bargaining on the part of employers.

    I noted also the ongoing agreement with IBEC and ICTU – whats interesting is how the influence of both organisations spreads well beyond their actual membership, for better or worse for both employers and employees.

    I’m not sure the recommendation to retain JLCs and REAs for non-union workplaces is healthy. It basically places the responsibity for managing industrial relationships and fairness of wage setting back to the state instead of forcing both groups to consult properly with each other. I wonder was this an ICTU snub to the government given its unwillingness to extend the European norm of compulsory bargaining rights to Irish workers. Whats curious is the assumption that this alone will protect the interests of those workers. What is more striking, though, is that while there is persistent argument that the wage rates set creates a floor, nowhere is it pointed out that they also effectively create a ceiling – something that employers did well out of during the boom.

    I don’t think a 100 year old set of anachronisms like this are appropriate in the 21st century. I don’t think they protect workers interests and the only employers interests they protect are unscrupulous ones. The current court challenge on the grounds of “consitutional property rights” suggests that there is a perception of the peasantry interfering with the rights of a superior entitled group on the part of some employer advocacy groups (and very successful and wealthy ones I might add). Such a mentality is feudal. I suspect the existing trade union movement is also aware that its exclusiveness creates a level of protectionism for existing members, which I think is behind the unwillingness to attempt to force universal collective bargaining entitlements to the entire workforce. At the same time it is obvious to me that not a single US multinational refuses to do business in France or Germany despite the enhanced set of union rights workers have, yet it is constantly paraded out here as an excuse.

    I don’t think the consultation was unbiased on either side, and I don’t think it really looked into the real issues at stake, which is the extent to which employers can make decisions while at the same time workers can take advantage of collective rights gaining mechanisms.

  6. @laura

    I did not read the report but allow me to refer to a comment you made above

    I don’t think a 100 year old set of anachronisms like this are appropriate in the 21st century. I don’t think they protect workers interests and the only employers interests they protect are unscrupulous ones.

    Is it not the point of JLC’s that they protect vulnerable workers against unscrupulous employers. And such employers ‘havn’t gone away, you know’.

    In addition these employers need not necessarily be Ma and Pa stores or Kilkenny farmers serving bread and brown sauce lunches. As we know from experience of large companies, eg Irish Ferries and GAMA, these tend to be pretty aggressive in relation to lowering wage rates.

    Not withstanding some comments that Ireland is uncompetitive vis a vis the UK in particular, the data on average hourly rates on table 4.5 page 29 of the report will not propel to riches any time soon.
    I am not clear if these are average basic hourly rates or average actual rates which would include overtime.

    Whatever about reducing overtime rates for Sunday, I am delighted that that the wages are some lower paid private sector workers will still be offered the protection of the State, however shaky that State may be.

  7. JLC’s/REA’s/REO’s should all be done away with – period.
    With the reinstated minimum wage in place – let the market take its course.
    Amazing that there is no meaningful ‘report’ on managerial and executive remuneration,fee and productivity levels – in both public and private sectors – wonder why??

  8. @vinny: ” …let the market take its course.”

    It has vinney – 500 mill in Chindia! Minimizing wages this amazing effect of consumption, and we DO want growth, don’t we?

    The other sectors you refer to are Protected Vested Sectors! No toucheee!

    Brian Snr.

  9. Curious is it not that the proposed abolition of JLC agreements is not twinned with any proposed reform of welfare payments?

    It is almost impossible for an unskilled/semi-skilled man with 3 or more children to get ‘back’ into employment. And what’s the government’s analytical response? The private sectors employing people are uncompetitive.

  10. @ The Alchemist –
    Fact – job offered to person in catering trade – semi-managerial/operational role – gross €600 per week – tip potential €100-€150 per week – all prsi/taxes etc paid as required – job accepted then rejected – person did not wish to have prsi number used – would lose much of current benefits/allowances – suggested using sister’s number who has returned to own country!
    Offer rejected!
    How many prsi numbers were issued and are now being abused along the lines above or in other ways?
    There are estimates of far more prsi numbers were issued during ‘Celtic Tiger’ years versus the actual population of the country…what’s happening to those numbers?

  11. @ Rob S

    I looked at that article.

    Am I to understand that it is FG policy to remove Sunday as a special day?

  12. It’s a pretty odd report that has very little to say on competitiveness, when the principle policy motivation in proposing change to the JLC and REA system is to boost competitiveness.

    Perhaps the authors thought that if they put it into the title of a chapter that largely avoids the subject it would go away and stop bothering them.

  13. @ Rob S

    I thought Richard Bruton announced this publicly.

    Anyway, am I to interpret FG policy as to abolish Sunday as a special day?

  14. I heard Rurai Quinn talking at some length on the radio yesterday about how arrangements for Sunday pay need reform. And Enda Kenny stressed that Bruton’s proposals were “personal”.

    It would therefore be more accurate to say that there are strong strands of thinking within both Labour and Fine Gael in favour of reform of Sunday pay, but neither has an agreed party position.

    They will probably have no choice but to enact reform in area anyway, as tackling this seems to have been a quid pro quo with the EU folks when they agreed to the Government raising the minimum wage.

    BTW, I have not looked at that TASC report, but looking at the original Eurostat data makes it clear that:
    1) In terms of labour costs per hour the hospitality industries of both Italy and Ireland are both mid-ranking in the EU, and Irish labour costs are well above those for the UK.
    2) In terms of labour costs per month, Ireland’s hospitality industry has high labour costs.
    The international comparison argument is therefore very well founded.

  15. @ BeeCeeTee

    Why would you bother use monthly data?

    Irish workers work longer hours each month. Is this more or less attractive to employers?

    Competitiveness in the sector is more to do with the over 75% of costs which are not wages.

  16. No need to worry that any undue haste will be evidenced. The ‘social partners’ are being wheeled in for consultation.

    @vinny

    Understand that completely. I spoke to a guy last month about work – agri sector. Not interested. Three kids and barely 30 years old. Told me he had given up cigarettes as a way of saving 3k for the two holidays he likes to take annually. He has been unemployed for two years.

  17. The wages for waitresses pretend that tipping doesn’t exist. This is apart form the fact that most waitresses don’t pay tax on cash tips. The minimum wage should apply for waitresses in restaurants.

  18. @all

    Do I recollect Richard Bruton ‘promising’, pre-election, that the members of ALL State Boards would be requested to resign within SIX months of this administration taking office?

    Quangos, of course, don’t do Sundays.

    BTW, did you hear the one about the Liquidators on €1,000 an hour; the mor_ya_eye_teeth barrister who collected €6 million; the consultant who wouldn’t get out of a trolley for less than half a million; the 500 acre multi-millionaire farmer from Co Meath who paid zero in land tax and a fiver to the Revenue in settlement for the past decade; the upper-echelons whose Pin-Shuns legally shunned the most recent levy; the tax free €20 million stallion who refused to function early on Sunday mornings unless he got time and a quarter; and so on ……………… Oh, The Troika will Shurely be Thrilled, absolutely Thrilled, with such Shennagins …… … are the 100 days up yet? Is the Dail still open?

  19. Rory, I mentioned monthly data because adding it provides a richer picture than hourly data alone. My point only depends on the hourly data.

    The cost competitiveness issues are not restricted to the sector. I think about 28% of the sector’s costs are directly from labour, but pay levels in other sectors influence the other costs. The total impact of pay across the Irish economy on the competitiveness of the hospitality sector is a lot more than 28%.

    The cost competitiveness of the hospitality sector also impacts on the competitiveness of other sectors. The sector gets well over half of its business from Irish-resident consumers and businesses, so improvements in its cost competitiveness feed back into improvements in the cost competitiveness of all other sectors.

    With these things it’s almost always possible to focus in on one bit of the picture and claim that it can be left alone because the impact of tackling it will be small. The problem is that when decision makers accept this argument it quickly becomes apparent that almost every individual change they might make can be seen as having a small impact. Treating that as a barrier to action is a receipe for paralysis.

  20. @ BeeCeeTee

    The hourly data is simply monthly data divided by hours worked.

    To improve competitiveness of the hospitality sector, I don’t see why we should begin with the lowest paid. Over 75% of the costs are not wages. I understand that costs from other sectors will feed into the hospitality sector, but I can’t see how they are largely influenced by wages.

    Rent/property is a huge expense for the sector. There are the profits to the owners (which have taken a bit of a whack), the are the costs of food ingredients (which are internationally competitive, controlling for quality). Energy costs are largely influenced from abroad.

    In Waterford, recently opened pubs (after one bar owner was liquidated) are hugely competitive, as their property/rental costs are a fraction of what they were 3 years ago. (Now we have pints for €3, live bands, and no cover charge.) We also have the cheapest hotels in Western Europe. But there is far more to competitiveness than price. (Waterford is addressing this by also having several festivals this summer, to bring in the crowds)

    The Eurostat data shows that Irish labour costs are broadly in line with the EU-15 (slightly below the average). So this can’t be the cause of any lack of competitiveness. I would consider rent/property to have been the main driver.

    A major issue with the Irish hospitality sector is that quality tends to be hit and miss. This is particularly relevant to tourists, as locals know nice places. I think we could improve competitiveness by addressing this information asymmetry (by having a more accurate rating of the firms in the sector). This would encourage places to compete on quality when trying to attract tourists.

    Cutting the pay of people in the sector at best will have a negligible impact on employment, and most likely further suck demand out of the economy, by redistributing income upwards to hotel/restaurant owners. Cutting the pay of 200,000 workers is also cutting the pay of 200,000 customers.

  21. Rory,
    Competition in the hospitality sector is pretty stiff, so most of any reduction in cost is likely to end up in lower prices, rather than the pockets of business and property owners. That will bring in more people from overseas. It will also cut costs paid by Irish consumers and businesses, which will drive more employment in exporting industry, which will in turn feed back into more employment in the sectors we are looking at.

    A cut in nominal pay will feed through to a cut the nominal cost of living. It won’t have much net negative impact on the average standard of living of people in employment in Ireland, but by raising the number of people in employment it will raise the average standard of living in the country.

    It’s important that pay cuts don’t just hit the low paid, but it’s equally important that the low paid are not immune.

  22. Restaurant competition is by nature monopolistic, so I doubt the full wage cut will be passed on. Even with monopolistic competition firms can make low profits.

    Why shouldn’t the lowest paid be immune? The evidence is against the idea that cutting their wages will increase employment. Its simply shifting real income from the low paid to restaurant owners, and the users of restaurants that don’t have their pay set by JLCs. So demand from people who’s pay isn’t cut will increase, but this is more than offset by those who have their nominal (and real) income reduced. This reduces aggregate demand, and employment for all.

    The wage structure in Ireland is very unequal, and we have large numbers of working poor. In Waterford there have been large price reductions, and without cutting pay.

    I can’t see any fairness arguments for why the low paid shouldn’t be protected.

    Hospitality labour costs are already below the EU-15 average. How much below the EU-15 average do you want them before they are ‘competitive’.

  23. @BeeCeeTee

    It’s important that pay cuts don’t just hit the low paid, but it’s equally important that the low paid are not immune.

    I wonder which book of economic or philosophical thought opinion that fits into.

    The low paid must share the pain, even if they experienced very little of the gain.

    Lower pay may lower the cost of the hospitality sector but it will also have the following effects:

    1. The lower employee spend will be translated 100% into lower consumption.
    2. The hotels owners, including Nama/ receivers, are likely to take the benefit of the saving to service dead property loans.

    Therefore other than assisting than increasing tourism, the domestic economic effects will be negative.

  24. @all

    “7.10 To summarise, the regressions do not provide any evidence to support large wage differentials. […], the fact that JLC/REA workers are as likely to receive overtime payments as non JLC/REA workers, and that the Sunday premium arises from a legislative provision that is independent of JLC/REA status, and that the purpose of regulation is to ensure that workers in JLC sectors in particular are paid reasonable market rates, [Duffy & Walsh] think this result is plausible.” (pp. 42-43)

    +1

    ~€10 x 40 x 52 = €20, 800 per year gross

    @ An Taoiseach, An Tanaiste
    Blind Biddy would like to know when the Blind Disability Allowance, cut by Minister Hanafin and co in previous mal_administration, will be restored as promised in pre-election ‘promises’ by both FG and Labour. “Culling a Quango or two should do it” says she …

    @De Serfs
    Wise up!

  25. I work in retail, part time because I cant get a full time job. I work about 10 of those hours after midnight and I receive time+half. I have 3 school/colege going children only one of which has been able to get a part time job, we have never lived beyone our means and we just manage, if they take away my +half it will effect me a lot it wont go to create jobs in the company I work for they only now give 3 month contracts to avoid giving hol/sick pay etc. my employer made 14mill as did her brother last year on dividends alone,i cannot see why the government want to give her money from my wage packet this doesn’t make sense to me. Maybe someone can explain.

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