WAGE cuts may be needed to save jobs, particularly in firms exporting to Britain, the director general of IBEC, Mr John Dunne, has warned. The need for continued wage restraint remained crucial because of the prospect of European Monetary Union taking place without British participation, he added.
He also said pay restraint would have to be a key ingredient in any successor to the Programme for Competitiveness and Work and suggested that tax cuts could help make this more acceptable to employees.
Mr Dunne's comments followed the annual meeting of the general council of IBEC in Dublin yesterday, at which it was decided to defer a decision on whether to re-enter talks with the Irish Congress of Trade Unions and the Government on a new national agreement until the autumn. The ICTU is to hold a special delegate conference in September to discuss whether it should enter talks on a successor to the PCW. It now looks likely that IBEC will await the outcome of the ICTU conference before finalising its own position.
Despite the success of the economy in recent years, Mr Dunne said last night that the economy would face major new problems, whether or not there was a successor to the PCW. Earlier he told the council that, while EMU options remain open at this stage, it was still very possible that Ireland would join around 1999 while Britain stayed out.
This would greatly increase the difficulties of large sectors of Irish business trading in Britain because of the strength of the Irish pound against sterling. These problems also had employment implications.
"The key to survival in that context", he said, "is to relate to the issues which help firms to be competitive in the UK market." He identified these as a reduction "to the greatest possible extent of those costs which are within our own control".
"Actions appropriate under this heading would include a further squeeze on non labour costs, continued diversification of export markets to areas outside the United Kingdom, further significant reductions in taxation and significant wage moderation to protect employment to the maximum extent." He also renewed IBEC's demand for "a sharp reduction in the rate of current expenditure". This remained a prime constituent in making the economy more competitive.
Asked if pay "moderation" to protect jobs meant trading pay rises, or even accepting pay cuts to save jobs, Mr Dunne said. "We will obviously have to give this matter more thought before we can get into discussions on what might follow the PCW. But clearly there will be sectors of Irish business which will have to reduce their cost base if they are to survive, and this can be done in a number of ways.
"We have already suggested that taxes on labour must be reduced. We also believe that personal tax should be significantly reduced. However, in some firms that might not be sufficient and we will have to think of ways in which the sort of flexibility required to deal with shocks which we cannot yet anticipate can be actually brought about."
Asked if he saw the sort of pay freezes or cuts accepted in firms like Packard becoming more widespread, he replied. "At this point we are not saying this is the case but we can't rule anything in or out because, clearly, in a situation where some reduction in pay was needed to protect a significant number of jobs, people should be able to address that in a way which allows them to make a choice between maintaining pay or maintaining employment."
However, Mr Dunne also pointed out that EMU and the pending enlargement of the EU would create opportunities as well for Irish business. Even excluding Britain, the EMU area would have a population of over 300 million, most of them relatively rich consumers. Provided the right preparations were made, there were extremely significant opportunities for Irish firms to exploit.
