Managers, professionals and skilled workers have done disproportionately well since 1987 during the era of national pay agreements, according to the latest quarterly report of the Economic and Social Research Institute.
In theory, national agreements should have benefited the low-paid most, with flat-rate increases and tax cuts specifically targeted at them. However, while workers gained 2 per cent a year more on average than the rates provided for in national agreements, managers averaged 3 per cent a year extra, while "labourers and others" managed only 1.2 per cent. The findings will increase pressure in the negotiations on a new agreement for low-income groups to be targeted, both in terms of amendments to the Budget and future measures. It could also lead to renewed pressure from unions such as Mandate and SIPTU for the national minimum wage to be introduced at £5 (€6.35) an hour rather than the proposed £4.40.
The ESRI supports the concept of the minimum wage, but warns that it should be introduced in "a structured and balanced way, so as to avoid serious earnings distortions". It is these wage distortions in the wider labour market which cause the ESRI most concern. It describes the extent to which qualified and skilled workers achieved increases significantly higher than pay norms set out in national agreements as both "surprising" and "worrying".
Even in the public service, where pay trends were significantly ahead of the private sector, the ESRI states that a significant amount of this was due to employees in higher grades receiving larger increases. As the figures cover from 1987 up to the end of 1998, they do not reflect the latest pay increases to nurses, which will accentuate this trend.
Within the private sector there were also major variations in wage trends. While construction languished in the early years of national agreements, between 1994 and 1998 wage rates on building sites have been rising by more than 5.5 per cent a year in real terms, compared with 1 per cent in manufacturing and 1.5 per cent in the finance and insurance sector. "The influence of working in a highly competitive environment, especially in the international market place" suggested that this was an important factor in wage restraint in sectors such as manufacturing, the report says. Overall, successive national agreements delivered pay increases worth 32.7 per cent, or 2.9 per cent annually. The figure is 34.7 per cent when the effects of local bargaining provisions are taken into account.
Returning to the issue of wage variations, the ESRI says that the present structure of pay relativities in the public service, which encourages "leapfrogging claims", would have knock-on effects in the private sector. Anticipated increases in hourly rates of 6 per cent in the private sector this year are double the average for all other OECD countries. This could have serious implications for competitiveness.
The degree of variation in pay, the ESRI predicts, would make a new national agreement more difficult to achieve. However, it also makes it all the more necessary.
