Public sector pay talks hugely significant

Talks between the Government and trade unions on public sector pay are in the sounding-out phase. Real engagement will start soon enough, but for now the rules of engagement are still not fully clear. Both sides seem willing to throw other issues in the pot that could help employees and perhaps be traded off against pay terms – issues such as State help on childcare costs and welfare entitlements. But no one is yet clear how far this might go, or whether it could form the basis for an agreement. And with inflation possibly averaging 6-7 per cent this year, and a 1 per cent pay rise due to be delivered under the existing pay deal, there is a lot of ground to cover.

The outcome of the public pay talks is of wider importance. The unions do not have enough coverage in the private sector to try to reach a wider deal but the outcome will inevitably set a benchmark for many private sector companies – unionised and otherwise, even if in multinational-land companies will continue to go their own way.

Private sector employers – or at least those who can afford it – will realise that inflation makes some level of pay increases inevitable. However, many are also facing big cost hikes in other areas, too, and an expectation that they will contribute to the new social agenda encompassing areas such as sick pay and pensions, either directly or via higher employer PRSI contributions. Suddenly the cost of employing people is rising sharply.

So while the public pay deal will be ringfenced, the outcome is of wider interest. Striking a balance will be difficult, with such uncertainty about the path of inflation. A shorter deal, perhaps covering 18 months, and trying to trade off some other benefits against pay increases seem like reasonable goals for the Government. Agreeing anything longer term looks impossible.