ON THE eve of negotiations opening on a new pay deal, the taoiseach-elect Brian Cowen yesterday expressed concern at "the very significant payments being made to senior business people".
Addressing the Irish Congress of Trade Unions' Economic Conference in Croke Park, Mr Cowen said he was concerned at the signals high levels of senior executive pay "send out to the majority of workers in relation to two key principles of social partnership: fairness and equity".
However, while firing a shot across the bows of highly-paid corporate executives, it is clear that Mr Cowen is looking for a moderate pay settlement in the negotiations that start today.
Moreover, he said it would be "futile and self-defeating" to seek pay increases to compensate for recent externally-generated additions to inflation. "It would add domestic price increases to imported ones. It would not only fail to improve living standards but instead would lead to widespread job losses, thus leaving those without jobs much worse off than before," he said.
The Irish economy has lost competitiveness in recent years due to excessive inflation relative to trade rivals and an easing in the pace of productivity growth, he pointed out. In the forthcoming talks, pay increases must be linked to future trends in prices and productivity growth if the competitive standing of the economy is to be safeguarded, he added.
However, Mr Cowen pointed out that forecast trends in productivity growth are likely to be much lower than in the second half of the 1990s, adding that inflation was expected to fall in the years ahead. Filtering falling inflation and low productivity growth into the pay equation would narrow the scope for increases in money wages in the period ahead.
Public service pay accounts for over one-third of all day-to-day public spending, he noted. Each 1 per cent increase in the public service pay bill adds just under €200 million to current public spending. Mr Cowen said it was important to ensure that increases in public service pay did not pre-empt public spending on other key priorities.
In a wide-ranging speech, Mr Cowen said Irish workers had benefited greatly from globalisation to date. As the global environment becomes more challenging, Ireland should resist any drift towards protectionism and concentrate instead on building on Ireland's comparative advantage in the production of knowledge-based goods and services.
In the face of increasing global economic integration, Government would continue to invest heavily in human and physical capital to improve national productivity performance, Mr Cowen said. Investing in upgrading the capability of low-skilled workers was particularly important to ensure "that low skilled workers do not bear a disproportionate share of the costs of adjusting to greater global integration".
But Government alone cannot ensure a smooth transition to a rapidly changing global business environment, he said. "Trying to take advantage of inadequate competition by increasing profit margins will benefit no one in the end." Reiterating his message urging wage moderation, Mr Cowen said that "the pursuit of unsustainable wage increases that cannot be justified by their productivity, will, if achieved, only constitute short-term gains with significant long-term costs for all".
