The End of the Partnership

Aidan Regan on the Future of Trade Unionism in Ireland

Most contemporary socialist, social democratic and labour parties across Europe emerged out of their respective trade union movements. Post World War II, it was recognised that to consolidate gains in the workplace required a political movement capable of legislating for those gains in government. To take wages out of the free market led to the right to collective bargaining. To enable citizens to have a social wage outside the labour market created the social welfare system. Thus, almost all of the progressive public policies we associate with ‘Social Europe’ have their genesis in the trade union movement. Neo-corporatism was a term that came to be associated with trade unions striking deals with government. The bargain was wage restraint for increased investment in social services by the state. Irish history, however, tells a somewhat different story.

Since the foundation of the Irish state, trade unions have had to strategise with successive centre-right Fianna Fáil and Fine Gael governments. Despite the formal association between the Irish Labour Party and some trade unions (the Irish Labour Party was established in 1912 at an Irish trade union congress in Clonmel), it is Fianna Fáil that most trade union members have traditionally voted for. Fianna Fáil, in recognition of this, has historically kept up a close but informal relationship with the trade union movement. This relationship began with Sean Lemass and continued right up through the reign of Bertie Ahern (who was a member of the Workers’ Union of Ireland).

Irish state involvement in Industrial Relations began with the establishment of the Labour Court in 1946. This remains the cornerstone of our industrial relations system. It has overseen the coordination of wage bargaining since the ‘national agreements’ in the 1960s, the ‘national understandings’ in the 1970s and ‘social partnership agreements’ since 1987. In term of Irish trade unionism, the central question guiding political strategy has been whether they should enter centralised wage bargains (facilitated by centre right governments) at national level or opt for free-for-all bargaining at enterprise level.  The determining factors for this strategy have been economic context, trade union density and the institutional framework of a voluntarist (as opposed to legalist) industrial relations regime.

It is within this context of strategising over centralised wage bargaining, facilitated by the state, that the future of trade unionism and social partnership must be contextualised. Social partnership was a strategy that enabled trade unions to influence cabinet government in the absence of a strong labour party. But, the bargain was not wage restraint for an increase in the social wage. It was a strategic bargain aimed at increasing the disposable income of trade union members (primarily through reducing income tax).

What is social partnership?

There has always been, and continues to be, a definitional problem with social partnership. Social partnership as a concept is borrowed from the co-determined industrial relations systems of Europe. It implies, and assumes, that the economic players involved are equal in their influence and bargaining power. This is not the case. It is not the co-determination of public policy as witnessed in the economic councils of Netherlands, Slovenia, Finland and Sweden.

Social partnership, in Ireland, means different things to different people. To some it is a system of interest intermediation, a mode of governance, a form of policy making, an industrial relations process or a glorified pay bargain. In practice, it contains an element of all of these. But, for the purpose of this article, I use social partnership to refer to a system of centralised wage bargaining that involves a series of trade offs for the economic actors involved. For trade unions, it is a political strategy that on the one hand gives them direct access to Cabinet government (sometimes influential but predominately consultative) whilst simultaneously negotiating national income agreements with employers and government.

Government and employers have their own rationale for entering national income agreements. Employers are interested in wage restraint and predictability (as is government – the biggest employer in the economy). The purpose of wage restraint, from the employers’ perspective, is to minimise inflation and ensure the profitability of industry. This profitability, the argument goes, enables job creation. More jobs mean more trade union members. Thus, employers and trade unions want job creation and access to the policy making process of government for different reasons.

Prior to the first social partnership agreement in 1987 there was period of free for all wage bargaining (at enterprise level). In this period, trade unions negotiated wage increases of up to 70 percent. However, take home pay decreased by almost 10 percent. This was due to excessive forms of PAYE taxation. Unemployment was soaring and the public finances were in a mess. When Fianna Fáil entered government in 1987 they offered unions a deal that would involve wage restraint (2 percent over three years) in return for a reduction in income tax, as well as active measures to create employment (trade unions were haemorrhaging members).  This led to the first national partnership agreement; the Programme for National Recovery.

This was the beginning of 23 years of national wage agreements covering the unionised sectors of the economy. In 2010 this density reduced to fewer than 35 percent of the workforce.

What is trade union density?

Trade union density is the number of workers who are members of a trade union as a percentage of the overall workforce. Across the western world trade union density has been in decline. In Ireland, despite an increase in membership since 1980, overall trade union density has fallen sharply. It peaked around 1980 at 62 percent of the workforce. The preceding period (1970’s) is often described as the golden age of trade unionism in all European countries. Trade union power, given the organisation of manufacturing industry, was at its peak. This power gave trade unions significant bargaining power with both employers and government.

Throughout the 1980’s trade union density averaged around 52 percent. But, membership declined steadily through the recessionary period. In 1998 trade union density had dropped to around 45 percent. But, membership had increased to 540,000.

This decline in density can be attributed to the rapidly changing structure and expansion of the Irish labour market. New foreign owned firms were being set up (with the US firms explicitly non-union), employment in the services industry grew at a rapid pace and there was a huge growth in managerial occupations. Getting organised in INTEL or Microsoft was ruled out before they even entered the Irish labour market.  Getting workers in cafes, shops and small firms (with high turnover and often less than 20 people employed) has proven to be difficult. Whilst inducing managers and high salaried employees into a union as opposed to professional associations problematic.

By 2005 trade union density was hovering around 40 percent. It is currently estimated to be around 35 percent. Tackling this decline in density and organising workers is the most significant challenge facing the trade union movement. The same applies to other liberal market economies such as the UK, USA, New Zealand and Australia. What all of these economies share are flexible and relatively unregulated labour markets with significant amounts of part time and sub-contract work. It is in this latter category that exploitation is most likely, and where trade union organisation is most minimal.

Why does it matter?

Trade union density in a voluntarist industrial relations system is massively important as it reflects the extent of workers covered by collective bargaining. Collective bargaining is the percentage of the workforce covered by negotiated trade union wage agreements. Those who are not covered by collective bargaining have their wages (and conditions) set by the ebb and flow of free market competition. But, perhaps more importantly, the fewer workers in a union, the less power trade unions have to influence the public policy agenda. Trade union density is a reflection of the power base of labour in its relationship to capital.

Also, it diminishes public support for trade union activity as workers begin to see organised representation in the labour market as less and less important. Currently, collective bargaining coverage in Ireland is approx 44 percent. Thus, only 44 percent of workers are directly covered by national partnership agreements. The remainder are decided by employers in response to market competition. This can often lead to higher wage increases, particularly in higher skilled occupations. It also individualises the employment relationship, the antithesis of collective organisation which, arguably, induces more solidarity amongst workers.

To understand the structural shift in employment (and declining density) one has to examine the sectoral makeup of the Irish economy. In effect, Ireland has four different economies. The first is domestic and Irish-owned manufacturing industry. These tend to be relatively well organised but in rapid decline. One only has to think about Irish Sugar or Waterford Crystal. The second is the public sector and contains significant amounts of professional occupations. This also includes semi-state and previously state owned companies such as SR Technics and Aer Lingus.  The public governmental sector is highly organised and strategically important with a trade union density of approx 80 percent. The non-traded construction sectors also tend to be relatively well organised.

The third economy is the highly productive, export-oriented, foreign-owned sector i.e. high-tech manufacturing and pharmaceutical companies. These are generally non-union and tend to remunerate their employees significantly above the national wage agreements. The fourth economy includes small and medium sized enterprises. These tend to be service oriented and often employ less than 20 people. They also tend to be explicitly non-union and employ well over 500,000 workers in the economy. These latter non-union categories are where most jobs have been created over the past 20 years. This rapidly changing economy (post 1990) has had a significant influence upon attitudes towards unionisation amongst the workforce.

Popular cultural legitimacy is intimately bound up with trade union density. As this declines, legitimacy declines. In countries such as the Netherlands, trade union density is less than 35 percent. However, collective bargaining coverage is legally extended to all workers in the economy. Thus, even if a worker is not a member of a union they still benefit from trade union representation. In the Netherlands and Belgium trade unions co-manage social insurance funds. Workers have an interest in trade unions that goes beyond increasing disposable income.

In Sweden, trade union density is approx 68 percent and bargaining coverage 91 percent. In Denmark, density is 69 percent and bargaining coverage 83 percent. In Finland, density is 72 percent, and bargaining coverage 90 percent. In the UK, density is 28 percent and bargaining coverage 40 percent. In the USA, density is approx 12 percent. Thus, contrary to popular opinion, countries with social partnership type arrangements tend to have higher levels of trade union density and significantly more influence upon public policy. It is the liberal market economies of the US and the UK that fare worst.

In terms of wage coordination, European economies had traditionally negotiated national income agreements similar to our national partnership arrangements. But, over the years, there has been a shift towards sectoral coordination or organised decentralisation. Thus, the Irish system is relatively unique in that it has maintained such a centralised system of wage bargaining. One reason for this is the importance of ‘government as employer’ in the process. Also, large unions such as SIPTU are organised on a regional (since the merger of the WUI and the ITGWU) as opposed to a sectoral basis. Regional or occupational forms of organisation do not lend themselves to collective or sectoral bargaining. Currently SIPTU are attempting to re-organise on a sectoral basis.

What workers are represented by trade unions?

Professional and technical occupations are the most highly unionised groups in the Irish economy. In the rest of Europe, with long traditions of industrial development, the concentration has tended to be amongst the manufacturing class, who in turn tend to vote for left oriented political parties. Density, in Ireland, is concentrated in higher occupation groups. In broad terms, the public sector is the most highly represented, over 80 percent. Traditionally, the coordination of pay in the public sector has been relatively disorganised. Under the national partnership agreements, coordination has, arguably, significantly improved. It developed a mechanism whereby consistency was achieved in how rates were set and who got what and when.

In terms of representation, the most worrying trend for the trade union movement is the decline in membership amongst three particular categories of workers (often intertwined) – young people, part time workers and the lower skilled. Traditionally the wages of those in low paid sectors such as catering, hotels and construction were set by the Labour Court. The agreements are coordinated by Joint Labour Committees (JLCs) and are called Registered Employment Agreements (REAs). During the boom years of the Celtic Tiger these secure but low paid jobs were highly unionised. But, very quickly, workers in these sectors were replaced by migrant labour leading to a significant structural change in representation. These legal agreements are now under significant attack by sectoral employer bodies such as the Hotels Federation (along with the minimum wage).

The National Employment Rights Authority (NERA), created under the last partnership agreement (Towards 2016), has recently disclosed the level of exploitation amongst low skilled workers. Whilst low skilled and migrant work is not heavily represented there has been a concerted effort by trade unions to tackle exploitation through employment rights legislation.  This underpinning legislation changes the employee relation to one based on law and not collective trade union activity. It changes the nature of a voluntarist system. But, in the absence of trade union representation amongst the lower paid, legislation is considered an important trade off.

With the introduction of the 2001 Industrial Relations Act, trade unions hoped to narrow the representation gap across the workforce. It was designed to enable a mechanism for trade union recognition amongst traditionally hostile employers. Ryanair challenged the legality of this act in the Supreme Court in 2007. They won. This has made the legal right to recognition a burning issue in Irish industrial relations and a significant challenge for the future of trade unionism in a rapidly changing economy.

What are the main challenges for trade unions in 2010?

There are three immediate challenges to the trade union movement in Ireland in 2010. One is directly related to the collapse of the pay bargaining element of social partnership. The second is related to the level of public sector autonomy from its employer; government. The third and most significant is directly related to trade union representation and organisation across the private sector. The current context provides an opportunity to link the first and third challenges together. 

Contrary to popular opinion, a national partnership agreement is still in place. It is called Towards 2016 and includes significant commitments on employment rights. According to many employers and trade unions these commitments are still ongoing. Thus, ‘social dialogue’ amongst trade unions, employers and government still exists. But, social dialogue is a pretty empty affair unless specific agreement can be reached on how to handle the current economic crisis. There was an attempt to develop a coordinated strategy in December 2009 but this fell apart when the government legislated for a public sector pay cut. This required emergency legislation to override existing legislation on the Non-Payment of Wages Act. The current Croke Park deal is even narrower again. It is a specific agreement related to pay and conditions between public sector workers/unions and government as employer.

When commentators refer to the collapse of social partnership they generally refer to the unprecedented withdrawal of IBEC and government from the national pay agreement. For the first time since 1987 there is no national pay agreement in place. This has exposed the immediate short term problem facing trade unions; how to collectively bargain at enterprise level over pay and conditions. Many trade union officials no longer have the skills to negotiate pay at enterprise level. 23 years of centralised pay bargaining has, arguably, disconnected trade union members and trade union officials from the process of wage negotiations. Some workers have become so disconnected that they thought it was the government giving them a pay increase rather than trade union representation. Reconnecting with firm level trade union activity is the first challenge facing trade union leaders in the absence of a national social pact. But, it is a challenging opportunity.

The second challenge is related to trade union autonomy. The reduction at source of membership fees creates a dependency for trade unions upon a particular type of membership fee. This system is called the SER.  The government used this publicly as a threat against public sector unions when they threatened to engage in strike action against pay cuts. If it was introduced it would have completely undermined the source of revenue that trade unions have come to depend upon. It limits their strategic autonomy in negotiating with their employer. In Sweden, and in some German Unions, there was a strategic decision to not opt for this type of membership fee structure. They never wanted to be in a situation where the employer could use it as a bargaining card. If the Irish government withdrew the SER system, many public sector unions would have had to re-contact all members to ask them to set up a direct debit account. They would have simultaneously lost members in the process and the necessary revenue to stay afloat. More significantly, it would have further decreased trade union density and bargaining power in the economy. 

Another issue connected to fee dependency is related to payments trade union leaders receive for sitting on the boards of state and semi-state companies. The leader of IMPACT received a five figure sum for sitting on the board of FÁS. This was not for the IMPACT union but for personal use. The general secretary of ICTU receives a sum for sitting on the board of Aer Lingus but channels this money into ICTU expenditure. Should trade union leaders, as is the case in IMPACT, be allowed to take payments for personal gain? In Germany, trade union leaders take a payment for sitting on state boards but they channel it into a research fund for students studying labour relations. No trade union leader takes the money for their own gain and if they do, they are vilified by their colleagues. This refusal of payment for personal and union gain stops the perception of a cosy elite and increases the popular legitimacy of trade union activity.

The third and long term challenge for the trade union movement is to organise and increase their membership across the economy. Given the gravity of the challenge some American unions have begun dedicating 30 percent of their expenditure to organising.  The absence of a centralised partnership agreement with government on how to exit the economic crisis provides an opportunity to make this a priority. It frees up time and resources for ICTU to refocus their raison d’être.  Organising requires a coordinated strategy across different unions and sectors. A collective fund whereby each trade union affiliated to the Irish Congress of Trade Unions (ICTU) would designate at least 15 percent of its expenditure (but could vary according to size and income) should provide the necessary resources to make this an immediate strategic priority.

What is the future – the organising union?

In politics, the absence of a clear collective strategy is a recipe for failure. The same logic applies to the trade union movement. The national partnership agreements have been and will continue to be a means to an end. Trade unions will continue to want access to the policy making apparatus of government. They will continue to struggle for social and economic justice. In this regard they will adopt whatever collective strategies are available to that end. But, strategic capacity requires strengthening the position of labour in its relationship to capital. The only way to do this is to organise and increase trade union density. Making this a priority should be the overarching strategic objective of trade unions in the coming years. It requires a move away from simply servicing the interests of their members to actively engaging in political activity. The first step in this regard is to rapidly improve and popularise an alternative political economic analysis on the type of society the Irish labour movement envisages for the 21^st century.