The rise and fall of social partnership: do governments need trade unions?

During the 1980’s one of the core economic problems facing the Irish government was minimising strikes and controlling wage inflation. The rise in inflation was widely attributed to individual trade unions using their collective bargaining strength to push up wages at the expense of competitiveness. This policy continued despite the rising unemployment crisis. Over 50% of the workforce was unionised, and 70% of it was covered by some sort of collective bargaining agreement. Crucially, unions were organised in the core export sectors of the economy.

From 1981 to 1986 the Fine Gael/Labour government employed a simple strategy: they ignored unions. They excluded them from policymaking and promoted firm-level wage setting. This was fine in theory, but in practice, it meant chaos. It meant that a fragmented union movement, with little or no coordination from the ICTU, continued its strategy of wage militancy. Unemployment soared. Spending on social welfare increased by over 200%. In the decade from 1980 to 1990, there were over 400,000 days lost to industrial action, one of the highest recorded in the OECD at the time. The government responded by raising income taxes. These were followed by a series of mass demonstrations, initiated by the ICTU, leading to one of the largest public mobilisations against an elected government in the history of the state.

Eventually, through engaging with the ICTU and the employer associations, the new Fianna Fail government of Charlie Haughey brokered a new centralised political deal with ICTU – key to this, was the unions’ acceptance of wage restraint in the interest of national competitiveness (to complement the gains of the 1986 currency devaluation). In return trade union leaders would only end their strategy of wage-inflation and industrial militancy if they were granted political access to the public policy levers of the state (particularly fiscal policy). The unions were off the streets, and it was the beginning of twenty years of national ‘social partnership’.

What ICTU could offer a weak government during this period was stability. It could refrain from industrial action, negotiate reform and get its members to comply with wage restraint. All of this, however, was dependent upon the ICTU having the legitimacy to be considered a representative of working people. In the 1980s, this legitimacy was generated from having a broad and inclusive membership in both the traded and non-traded sectors of the economy. But throughout the late 1990’s and 2000’s, trade union membership was increasingly narrowed to the public sector, with the implication that ICTU became a weakened social partner.

From 2008-2009, during the economic crisis, FF eviscerated social partnership and cut public sector pay twice. ICTU attempted to mobilise public opinion against government austerity. The strategy backfired. All attention focused on the rise in public sector pay from 2002, as part of the benchmarking process. Public distrust in unions jumped from 30 to 55%. Unlike 1987-1992, trade unions were increasingly perceived as a public sector interest group, lobbying government in defence of overpaid civil servants, and labour market insiders.

The weakened ability of ICTU to be considered a social partner is intimately bound up structural changes in the labour market, which have affected all western economies. Collective bargaining coverage (the percentage of workers covered by a negotiated agreement) declined from approximately 71% in 1981 to 40% in 2010. In the late 1980’s, most of the Irish export sectors, and the commercial semi-state sectors, were highly unionised. In 2011 the 400,000 days lost to industrial unrest had dropped to 3,700, the lowest ever recorded.

What does all his mean? ICTU has lost the stick of protest to threaten government and the carrot of problem solving. Overall trade union density has declined from 35 per cent in 2007 to 27 percent in 2015, an all time historic low. In the private sector, density has declined from 24 per cent to 16 per cent. In the public sector, density has remained strong at over 60 per cent, whilst collective bargaining remains at least 85 per cent. Unions in the public sector are simply too strong to be ignored.

Outside the public sector, it has been assumed that the government no longer need private sector unions to guarantee national competitiveness, or to ensure industrial and political stability. The recent LUAS strike, however, challenges this assumption. Previously this strike would have been solved within the institutions of social partnership. SIPTU shop stewards would have been brought into line for breaking a national agreement. Much like the 80’s – in the absence of a strong ICTU, and a national process to solve wage and labour market problems, individual unions are now free to pursue their own self-interest without constraint.

This creates a strange paradox. In the context of EMU currency constraints, the only policy instrument left to government, aimed at coordinating cost competitiveness, is wage and labour market policy. During the crisis, collective bargaining was re-centralised in the public sector and de-centralised to the market in most of the private sector. But contrary to a lot of neoliberal market assumptions, it was the centralised institutions of collective bargaining in the public sector that made possible a coordinated “internal devaluation”. In the absence of the public sector agreements (Croke Park and Haddington Road, in particular), it is highly questionable whether the government could have implemented their fiscal adjustment policies whilst retaining social peace.

This observation complements a large body of research in comparative political economy, which suggests that coordinated wage setting, rather than the market, is better placed to generate the conditions for national competitiveness. Think Germany.

 

 

Comments

comments

Author: Aidan Regan

I'm an Assistant Professor at the School of Politics and International Relations, University College Dublin (UCD), and Director of the Dublin European Research Institute (DEI). My research is primarily focused on comparative and international political economy.

10 thoughts on “The rise and fall of social partnership: do governments need trade unions?”

  1. The conclusion that “coordinated wage setting, rather than the market, is better placed to generate the conditions for national competitiveness.” is spot on, whatever the naysayers may argue.

    However there was a further benefit to national wage setting not alluded to in the article.
    That benefit was that ‘national wage agreements’ carried beyond unionised or otherwise represented employments.
    Enterprises with non-union workforces generally implemented ‘national wage’ agreements on the basis that they were ‘national’ in character, and those enterprises did not wish to be seen to publicly renege on a national norm. This had the effect of increasing wages by a defined minimum on a near-national basis.

    There is clearly a lot more, or there should be a lot more, to national wage agreements than ensuring ‘competitiveness’. Therefore the statement that;
    “Outside the public sector, it has been assumed that the government no longer need private sector unions to guarantee national competitiveness, or to ensure industrial and political stability.” shows in the case of those holding that view, a very myopic and indeed irresponsible view of the government role in wage setting in an economy or in national economic and social policy implementation.

    A well argued article, even if those listening care little for good arguments, as long as their own nests are well feathered.

  2. While I agree with many of the points made I think it only fair to mention that the trade union movement have effectively copper-fastened the trend of declining union membership in both private and public sectors due to their own short sighted actions.
    The reason employers (including the state) were so insistent on introducing lower pay rates and entitlements for new member is that it it doesn’t just save money, it weakens the very legitimacy of the TU movement itself as it gets them to abandon the core principle of solidarity.
    Its a genie that will not be as easy to put back in the bottle many public sector trade unionists seem to think.

    I wrote in a blog for young people recently ( http://www.theyoungcelts.com/manufactured-consent-of-age-inequality-in-modern-ireland/ ) which included he following assertions.

    “Some decisions taken by the upper echelons of the trade union movement since 2008 have also been damaging to younger people. The Unions agreed to with government to reduce working conditions for new entrants in exchange for not reducing pay and conditions of existing members. What fools they were. How did they expect to abandon the core union principle of solidarity and expect to be able to represent their members into the future when increasing numbers of their members would be seen as second class workers doing exactly the same jobs. Their current cries that the pay restrictions were imposed are baseless. As if the unions had suddenly lost the capacity to ballet their members. These agreements were agreed in order to protect the pay of older union members.”

    A worrying aspect is that it has effectively become a new norm for agreements to be reached including lower pay scales for new entrants. The Transdev V Luas drivers dispute was eventually resolved recently (Siptu were the Union) and you guessed it there does include a provision for new entrants to be paid 10% less than those who joined up till the agreement was reached.

    Unless younger people working in the trade unions demand that this practice end they are almost ensuring complete collapse of Trade Union involvement in the private sector.

    1. You nailed it! Getting those involved to admit it is, of course, another matter.

      I would not, however, mourn the loss of public service trade union involvement in directing the affairs of the nation.

      In fact, the level of trade union representation seems, on the evidence, not to be of particular significance, other factors being much more important e.g. the situation of France.

      http://www.worker-participation.eu/National-Industrial-Relations/Countries/France

      In Germany, there is recognition that the level of public services that can be provided is a function of the capacity of the traded sectors of the economy to pay for them. Ireland shares the same insouciance as France in the matter. However, we have not yet gone as far as the French in attempting to run the entire workforce as a form of public service.

      A picture, they say, is better than 1,000 words.

      https://www.google.ie/search?q=code+du+travail&source=lnms&tbm=isch&sa=X&ved=0ahUKEwj4mMWQvu7NAhVXFMAKHdsHAfwQ_AUICCgB&biw=1024&bih=481

  3. Lex had a piece about workers on boards today.
    http://www.ft.com/cms/s/3/4df6c7f8-4780-11e6-8d68-72e9211e86ab.html

    Conventional neolib wisdom says workers looking for more money is bad for the firm.
    But reality says that without payrises the totality of financial markets is one big Ponzi scheme .

    Systems need to be kept in balance to flourish.
    The weakening of unions was one of the main achievements of the 1% but it was a pyrrhic victory.
    Without payrises demand stagnates. Revenues stagnate. Bond sustainability deteriorates. Collapse becomes inevitable.

    1. @ Seafoid.

      https://www.linkedin.com/pulse/why-were-giving-our-employees-raise-jamie-dimon?trk=eml-b2_content_ecosystem_digest-hero-14-null&midToken=AQE9vkhI4kbw9A&fromEmail=fromEmail&ut=3hr2rLpkSgtnk1

      Could it be that this is the neoliberals way of trying to allow markets to flourish without the TU’s?
      Is this more than lip service and will others follow? Nine years after the Crash and QE to infinity, are they actually catching on? It’s the hope that kills you. 🙂

      1. Eamonn
        http://www.counterpunch.org/2015/01/15/40-years-of-economic-policy-in-one-chart/

        Goldman Squid

        On the outlook: “There are signs on the horizon that we’re finally coming out of that environment. A good reflection of that is that the Fed is starting to raise interest rates . . . We see the same things that they must be seeing. That’s a source of optimism.”

        This is pure groupthink.

        Swiss TV had a quick report before the sports news on income distribution today. The richest 2% own 50% of everything. In the US everything is bigger, everything is more extreme. The richest 1% of Americans own 50% of everything. There is a price for overdoing it

        http://www.dailymail.co.uk/news/article-2117997/Making-invisible-visible-Haunting-pictures-Americas-vulnerable-people-shot-photojournalists-poverty.html

        Equity and bond markets are going to collapse without pay rises. Everything else is deflationary.

  4. There are several fallacies in here.

    Take this one “During the crisis, collective bargaining was re-centralised in the public sector and de-centralised to the market in most of the private sector. ”

    There was no collective bargaining around FEMPI I in 2009. A central government facing a 30% cut in revenues legislated in a hurry to cut its own workers’ pay by a large amount. This was not “collective bargaining”. It was done by fiat and without the workers’ consent. It was also done a mere 8 months after a collective agreement had been reached! Cutting pay like this turned out to be legal in Ireland. It is not in many other countries. The trade union body essentially decided not to strike in response because they knew there was no money there. There was nothing “collective” about it and there was no “bargaining” involved.

    1. I am well aware that what you have laid out is the official Trade Union line. I am also saying the idea that this could possibly be true is laughable. The Unions are hiding behind this Fempi legistlation as a cover. The teaching unions recently went on strike in order to protest against a small change in the junior cert syllibus.
      However massive cuts focused on new entrants while existing members were largely protected was not grounds for industrial action? I know young people and the media are supposed to just swallow this obvious fallacy but it just does not hold up to any kind of elementary logic. The fact the policy of cutting new entrant pay has continued in other industrial desputes is evidence of this.
      If it were true the government wanted to impose a massive cuts just to new members why didnt the unions ask for the cuts to be spread evenly among all members? Strange no such request was made.

  5. The sidelining of unions was and is systemic. Bill Gross on the big picture

    https://www.pimco.com/insights/economic-and-market-commentary/investment-outlook/six-packin

    It is obvious that “capital” as opposed to “labor” – moving from 8 to 13% of GNI over the past three or even 30 years – has been the cyclical and secular champion. Why one or the other should be policy and politically advantaged is not commonsensically clear. Granted, the return on capital as opposed to the return to labor should logically be higher if only to encourage savings. But once an historical midpoint or range has been established, a relative equilibrium should be observed. Even conservatives must acknowledge that return on capital investment, and the liquid stocks and bonds that mimic it, are ultimately dependent on returns to labor in the form of jobs and real wage gains. If Main Street is unemployed and undercompensated, capital can only travel so far down Prosperity Road.

Comments are closed.