Saturday, April 27, 2013

27/4/2013: Village Magazine, April 2013

The third of three posts covering my recent articles.

This is an unedited version of my regular column in The Village magazine, April 2014.

As the events of the last few weeks clearly show, Irish trade union movement is suffering from a number of acute crises, ranging from systemically existential to psychological.

First up, the crisis of identity, best symptomised by the conclusion of the Croke Park 2.0 deal in which the Unions once again traded the interests of their future members – the younger public sector workers – to preserve the privileges of their current and past members. This is hardly surprising. During the last decade-and-a-half, the Unions and their leadership have became firmly embedded in the corporatist structure of the Irish State. Self-serving, focused on the immediate membership concentrated in the least productive sectors of the economy, the unions have opted to be paid over being relevant to the changing economy and society.

Second, the crisis of the short-term memory amnesia. In recent weeks, the Irish Trade Unions have managed to produce much bluster on the topic of the centenary anniversary of the 1913 Lockout. Throughout the crisis, the very same unions have been vocal on the topics of social fairness, austerity, protection of the frontline services etc. Yet, all along, the Liberty Hall has attempted to sweep under the rug its principal role in helping the Irish State to polarize and pillage both the society and the economy during the Celtic Tiger era, in part aiding the very processes that led to our national insolvency. Promoting the narrow interests of the state and associated domestic private sectors’ elites, the Social Partnership (including the two Croke Park agreements) assured boards representations, funds and other pathways to decision-making for unions. This power was deployed consistently to reduce accountability in the public sector for decisions and actions of its foot soldiers and bosses alike. By corollary of the cooperative approach to policy formation, the Partnership also protected domestic sectors, especially those dominated by the semi-state companies.  As the money rolled into the unionized sectors of the economy, the Unions had no problem with rampant costs inflation in health insurance and services, energy, transport, and education. The interests of the own members were always well ahead of the interests of the society at large.  Thus, today, in the environment of reduced incomes and high unemployment, with hundreds of thousands households in sever financial distress, Liberty Hall sees no problem with state-generated inflation in state-controlled Unionized sectors.

All in, the irony has it, Irish Trade Unions movement has been traveling along the same road previously mapped out by the Anglo Irish Bank: reducing their scope of competencies, their reach across various social. demographic and economic groups, and focusing on a singular, medium-term unsustainable objective. Where Anglo, post-2001, became a monoline bank for funding speculative property plays, Irish Trade Unions today are a monoline agency for preserving the status quo of the incumbent public vs private sector divisions in the economy.

The failure of the Trade Unions movement model in Ireland is best exemplified by the years of the current crisis.

Since the onset of the present economic recession Irish Government policy, directly and indirectly supported by the majority of the Unions’ leaders was to consistently shift the burden of the economic adjustment to younger workers in both private and public sectors, indebted Irish households, and consumers. Liberty Hall’s clear objective underpinning their position toward these groups of people was to retain, at all possible costs, the pay and working conditions protection granted to the incumbent full-time employees in the public and semi-state sector. Grumbling about the ‘low-paid public sector workers’ aside, the Unions have consented to the creation of a two-tier public sector employment with incumbent workers collecting the benefits of jobs security and higher pay, and the new incoming workers paying the price of these benefits with lower pay and virtually no promotion opportunities. The very same unions are now acting to preserve, at huge costs to the economy, unsustainably high levels of employment in our zombified banking sector.

Even on the surface, based on the headline figures, the Unions act to protect the pay and working conditions of the incumbent public sector employees. Average weekly earnings in Ireland have fallen 2.7% between 2008 and 2012 in the private sectors, while in the broader public sector these were down only 1.1%. Over the same period of time, the pay gap between public and private sector has risen from 46.1% in favour of public sector employees to 48.5%.

But the reality is much worse than that.  Between 2008 and 2012, numbers in employment in private sectors have fallen 14.7% while in the public sector the decline was less than 8.9%.  Within the public sector, largest losses in employment took place in Defence (-20% on 2008), Regional bodies (-15.4% on 2008), Semi-State bodies (-10.1%). No layoffs or compulsory redundancies took place, with natural attrition and cuts to contract and temporary staff taking on all of the adjustments.

In simple terms, the Machiavelian Croke Park deals have meant that the Irish public sector ‘reforms’ were neither structural, nor progressive in their nature. These ‘reforms’ do not support long-term process of realigning Irish economy to more sustainable growth path away from the bubbles-prone path of the last fifteen years.

Lack of layoffs and across-the-board shedding of temporary and contract staff have meant that the public sector in Ireland has lost any ability to link pay and promotions to real productivity differentials that exist between individual employees, work groups and organizations. This effect was further compounded by the Croke Park 2.0 agreement. The shinier the pants, the higher the pay principle of rewards has now been legally enshrined, relabeled as a ‘reform’ and fully protected at the expense of younger, better educated and potentially more innovative employees.

Such a system of pay and promotions engenders severe and irreversible selection bias, whereby the quality of applicants for jobs in the public sector is likely to decline over time, with more ambitious and more employable candidates opting out of pursuing careers in the state sector. Deterred by limited promotions opportunities and lower pay for the same, and in some cases heavier workloads, younger applicants are likely to seek work in private sector and outside the country. This selection bias will only gain in strength as economy starts to add private jobs in the future recovery.

The status quo of non-meritocratic employment in the public sector will also mean continued emigration of the younger workers with internationally marketable skills.

Meanwhile, per EU-wide KLEMS database, back at the peak of the public sector activities in 2007, labour productivity in Ireland’s public sectors was already running at below 1995 levels. In Public Administration and Defence, Compulsory Social Security sector, labour productivity stood at below 86% of 1995 levels, in Education at 80% and in Health and Social Work at 95%. In contrast, in Industry, labour productivity in 2007 was running at 153% of 1995 levels.  The same holds for the technological innovation intensities of the specific sectors. Three core public sectors of public administration, education and health all posted declines in productivity associated with new technologies compared to 1995 of 17-30% against an increase of 8% in Industry and a 20% rise in Manufacturing.

If Irish public services productivity was falling in the times of massive spending uplifts and big-ticket capital investment programmes, what can we expect in the present environment of drastically reduced investment? Unfortunately, we do not have data beyond 2007 to provide such an insight.  But the most probable answer is that stripping away superficial productivity gains recorded due to higher current spend on social welfare supports being managed by fewer overall state employees, plus the productivity growth arising from reductions in employment levels, there is little or no real same-employee productivity gains in the public sector.

One has to simply consider the ‘cost reduction’ measures enacted through the Budgets 2010-2012 to realize that during the crisis, Irish public sector was shedding, not adding responsibilities. Much of these reductions in services was picked up by the private sector payees and providers. This too implies that the actual productivity in the public sector in Ireland has probably declined during the years of the crisis.

Marking the centenary anniversary of the 1913 Lockout, Irish Trade Unions movement needs serious and deep rethink of both its raison d’etre and its modus operandi. Otherwise the movement is risking being locked out of the society itself as the irrelevant and atavistic remnant of the Celtic Tiger and Social Partnership.

The Liberty Hall must shake off the ethos of corrupting proximity to the State power and re-discover its grass roots. It will also need to purge completely the legacy of the Social Partnership and embrace new base within the workforce and the society at large in order to assure its ability to last beyond the rapidly advancing retirement age of its members. Lastly, the Unions should think hard about their overall role in the society to better balance the interests of their members against the needs of the country and the reality of the new economy.

Irish society needs a strong and ethically underpinned Unions as the guarantors of the rights of association and supporters of the policy dialogues and debates. What Ireland does not need is another layer of quasi-state bureaucracy insulating protected elites and sectors from pressures of demographically young, technologically modernizing and global competitiveness-focused small open economy.

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