The Lonely Predicament of David Begg

ICTU’s David Begg is in a reflective mood. He admits that workers received no gains under the last wage agreement because inflation wiped them out. He even went so far as to say that 100% pay increases would not hugely improve people’s lives

‘ . . . if they can’t buy education or if they can’t buy health services the way richer people can.’

Now, if people’s living standards didn’t improve over the last three years – when GNP growth was strong, public finances were healthy and the economy was generating employment; if people weren’t getting a kickback then, what’s the chances now? Mr. Begg’s options aren’t encouraging. That’s why I suspect that the general secretary of ICTU, sitting quietly in whatever room allows him to ponder these issues in depth, is acknowledging, at least to himself, that the game is up, that the very motor of social partnership is grinding down, that a new model has to be put in place.

If only he and the rest of us could figure out what that model looks like.

But advice is at hand – in the person of Jim O’Leary no less. Now I suspect Mr. O’Leary is not the first port of call when trade union officials are looking for counsel. But good advice is good advice, and even if one does not buy into all aspects of Mr. O’Leary’s analysis, his focus on one, heretofore neglected, aspect of wage negotiation should be seriously considered and seriously pursued. Namely, the social wage.

Let’s first examine Mr. Begg’s limited options. Social partnership was born and sustained on many principles but central to all of them is that wage restraint would be compensated by tax cuts, thus increasing net take home pay. This fundamental principle has resulted in industrial stability as workers abandoned their right to negotiate wages locally and strike in pursuance of those claims. That is why, when one strips away the embellishments, social partnership is a wage deal. No wage deal, no social partnership, not in its current form anyway.

One of the results is that the State has slowly been downgrading its ability to resource public services and capital infrastructure by reducing its revenue stream in order to fund wage restraint. Yes, it has been argued that lowering taxation would generate more economic activity, which in turn would create ever-higher revenue which could be invested in social and economic modernisation. These ‘self-financing tax-cuts’, beloved of the Fianna Fail leadership in the 1970s, only make sense in a bad X-Files episode. When Finance Minister Charlie McCreevey literally squandered the fruits of the emerging growth on gratuitous tax cuts resulting in an unleashing of a rampant property market, the rot truly set in. And that’s where we are now - in the rot.

There's no room for tax cuts. The budgetary deficit is almost out of control. There’s no room for PRSI cuts – the last throw of the ‘compensate wage restraint’ model (though so desperate is the Government they just might roll the dice and damn the Social Insurance Fund). So how can wage restraint be compensated? It can’t – and Mr. Begg has already acknowledged this.

Fianna Fail is placing all its eggs in the ‘bricks and mortar’ basket called the National Development Plan, prioritising this investment over current spending (read: public services). So we’re looking into real cuts in day-today government spending.

And while trade unions will make the case for high wage increases (and they will be right to do so), it is very difficult to see a repeat of Towards 2016’s 4.8% annualised wage increases. The Government, as employer, will keep wage rises as low as possible. They will be strongly supported by private sector employers. ICTU will find itself trapped in a pincer movement.

Over to Mr. O’Leary. He sees an ‘opportunity’. He cites a ‘great flaw’ in social partnership which he says should be put right: the social wage. The social wage, as commonly understood, is that part of workers’ compensation that is delivered by free or heavily subsidised goods and services. For instance, free public health and education, social and affordable housing, etc. Wage increases are restrained in exchange for investment into services that will increase living standards and reduce living costs (e.g. GP costs don’t rise at the point of delivery because they’re free). The social wage doesn't replace actual wages but forms a complementary front in which trade unions can negotiate increases in living standards (countries with the highest social wages also have some of the highest actual wages).

Of course, the social wage has gone out of fashion with the rise of neo-liberalism and a privatised economic culture. But Mr. O’Leary suggests we look again. Would not funding

‘ . . the creation of a world-class health system or a world-class education system or indeed world-class police service . . . not greatly enhance Ireland’s attractiveness as a place to live, work and do business, and thereby make a significant positive contribution to the economy’s competitiveness in the long run?’

Definitely, and we could throw in a world-class public transport system, childcare system, nursing home system, a world class system of community leisure facilities, etc. That’s the great thing about the social wage – it expands our idea of wealth from out of the narrow nexus of wages and salaries into (dare I say) collective provision which is available to all, regardless of wealth or status.

But there’s a sting in the tail. Mr. O’Leary puts this social wage paradigm in the context of (a) increasing taxes and (b) demonstrating that

‘ . . . the money was well spent, that public services were delivered efficiently, that waste has been reduced to a minimum and that any money raised would be used to finance a desired improvement in the quality or range of social infrastructure.’

The problem with this is the context. Mr. O’Leary himself is quite pessimistic about our growing annual deficit. He believes there is a danger that this year it could

‘ . . . threaten a breach of the 3% of GDP budget deficit ceiling stipulated by the Stability and Growth Pact.’

The Left usually has no problem with raising taxes to finance public services. But if Mr. O’Leary is right – whether this year or next year - we may well find ourselves in a situation where taxes are raised merely to plug the growing hole in the finances – not expand public services or collective provision. This is not an enticing platform from which trade unionists might argue for higher taxes.

The second problem is the efficiency of public services. Is it being suggested that ICTU insist the Government not only slam on the brakes of their privatisation of health care, but actually go into full throttle reverse? Well, they can try but despite what some commentators and Fine Gael spokespersons claim, Government policy is determined in the political sphere, not in negotiations over what is essentially a pay deal. My fear is that ICTU, were they to go down this road, would get little joy.

Is any of this fatal to Mr. O’Leary’s proposals about the social wage, increasing taxation and efficient public services? Absolutely not. It should have been, from day one, the starting point of social partnership. The revival of that model must start from there. This is the long game. But in the meantime, for trade unionists, there must be a short and middle game. And there must be something more.

When we look at certain countries with a high level of social wages, we not only find high taxation, high expenditure, high levels of Government intervention, high efficiency, high wages and close partnership – we also find countries with deep roots in social democracy, where Left parties have been the dominant force. Ultimately, it is a political project – one which facilitates trade unionists in the enterprise sphere – but one that always comes back to the political. Not only do we not have that history, the Left today is not addressing the difficult solutions to the crisis created by the conservative consensus. Strong medicine is called for – and a believable prognosis of life without our current diseases. But the doctor is not in the house.

So ICTU is alone. For now. With rising debt, spending cutbacks, possible tax rises (y’know, the stealth kind) to plug the gap, and low wage rises savaged by inflation – Mr. Begg has a lot to think about.

He deserves all our support.

Comments

[Pavement Trauma]

Good post.

The 'social wage' concept is an attractive one. But.. (there is always a 'but') it is a mirror image of the tax cuts for wage moderation trade off of the social partnership agreements, with one potentially fatal difference.

With a tax cut you see the effect in your next pay packet. You have control over how it benefits you.
You can waste it, save it, invest it, blow it or whatever.

With a tax increase to pay for the social wage, you may see the improvements you hoped for in particular services or ... you might just see the extra money get p*ssed up against the wall of (take your choice of) the next benchmarking agreement, the health system black hole, a public transport system that treats its passengers with contempt etc.

The difficulties of implementing public service improvements are by no means just down to the workers in those areas but - let's be honest - they don't always make it easy.

If the union movement want to make the social wage argument, I think they have to add their shoulders to the wheel to improve these things and help convince people that extra public money will bring extra public benefits. That might bring them into conflict with their primary purpose of representing the interests of their members.

[Michael]

Yes, Pavement Trauma, public services have been so marginalised as a benefiicial economic force - by parties that are hostile to the public sector (e.g. Mary Harney in Health, etc.) - that I suspect that people don't have trust in the public realm to better their lives. In that sense, arguing for a social wage will fall on deaf ears, including many trade unionists.

Therefore, the Left has to be just as ruthless as to the causes of our underperformance in the public sector, as the Right. Even more so because if we want to put the case for greater expenditure, we have to be more vigillant as to the quality of that expenditure.

As you probably know, the OECD report on the public sector is coming out in a couple of weeks. Now that should be fun and games, though I have a sneaking suspicion of where they are going to start from and where they are going (all you have to do is go on their website and read their idelogical orientation, though admittedly they are rethinking a number of areas in light of the effects of globalisation). I'm sure we'll meet up here on that one.