The partnership approach may have lost its appeal as a way of determining wage increases, according to an increasing number of economists.

Last weekend's economic conference in Kenmare heard various arguments saying that the whole approach may have outlived its usefulness. The dissenters from this view were, naturally enough, the employers organisation, IBEC. The ICTU was not represented, but it also still holds a candle for partnership.

There can be little doubt that for many in the private sector, Partnership 2000 is not a factor, as they have received much more rapid pay increases than it agreed.

Many believe that they would do better without a new agreement being negotiated, allowing them to negotiate rises locally. This is likely to be true in a booming economy facing labour shortages, but arguably would not be the case when the economy turns the corner and unemployment is once again rising.

One interesting point raised in Kenmare by the head of the New Zealand business association, Mr Roger Kerr, is that the notion that organised labour and employers compete with each other may be too simplistic. Rather - and this is probably particularly the case in a booming economy - employers compete with each other for employees while employees compete for jobs.

As Davy Stockbrokers chief economist, Mr Jim O'Leary, said, this implies that the labour market is not one homogenous market. Rather it is a highly-segmented market, perhaps made up of thousands of small "markets". There is, for example, a market for electricians, just as there is one for theatre nurses or geography teachers.

As Mr O'Leary said, many of our policy assumptions are based on the idea that there is one homogenous jobs market. As a result it is thought to be sensible, for example, to give a prison officer in Limerick the same pay rise as a teacher in Dublin.

Of course the reality, as Dr Philip Lane of Trinity said at the conference, is that there are huge regional variations in the jobs market. And a lot of the pressure on public sector wages has come from rises in house prices.

House prices have risen across the Republic but it is the sheer scale of the rises in Dublin which has caused most problems. Therefore it might make sense to pay workers in Dublin an allowance for living in a high cost centre.

Indeed, the recent huge demand for civil service places outside Dublin testifies to how living outside the capital is now considered to confer a higher quality of life.

Thus, while there is probably merit in compensating Dublin-based teachers or nurses for the high level of house prices, there is no rationale for applying this across the State, if house price rises are far lower elsewhere.

Mr Kerr also made the point that the Government should consider if there is evidence that a market is failing, before it decides to intervene. If you apply that logic to the Irish market, according to Mr O'Leary, there is a question of whether there is still a case for the Government to be involved in centralised pay bargaining.

He also questioned whether it is to the advantage of individual companies, or their employees, to centrally negotiate pay through the social partners.

Already in the private sector, market forces have ensured that different sectors have paid workers different rates of increase. There has also been an increasing recourse to bonuses. Workers in sectors as varied as construction and technology are not subject to Partnership 2000. And private sector workers who are tied by it are already agitating for increases of 10 per cent or more next year.

Of course, IBEC argues that abandoning Partnership 2000 would prove very difficult for the economy. But apart from some pick-up wage inflation, which could act to cool the economy down somewhat, it is not clear that these arguments hold very much substance.

Undoubtedly the inclusion of the voluntary sector and agreements on social inclusion and other areas such as welfare are very valuable in terms of an overall partnership approach, but there may be a question mark over the wage element.

In the private sector, with unionisation at less than 30 per cent, it is unlikely that bargaining power is larger for employees via central negotiations than would be the case if they negotiated individually. In a free-for-all, it simply means that scarcity and skills shortages will determine wage rates.

However, there will still be a push for a partnership deal. For the trade unions, a booming economy means they have a good deal more negotiating power than in an economy in recession. For many trade unionists, it is important not to throw away too much, in the expectation that the good times will roll forever.

In New Zealand, employees now negotiate individual employment contracts. Interestingly, it does not appear to have delivered particularly well and, according to Mr Kerr, economic performance has been "mediocre at best".

At Kenmare, Mr Brian Geoghegan, IBEC's director of policy, said some move towards the New Zealand model would have great attractions, if social partnership proved to be not working.

However, for the moment the concentration will be on seeing whether the various tensions can be accommodated in a new partnership deal. And here, the central issue of a wage agreement provides a major hurdle.

Employees want substantial rises, including an element of profit sharing or bargaining at a local level. The employers want a continuation of moderate increases and have yet to make any concession on local bargaining or profit sharing. But, in many cases, they are already being forced to "pay up" to attract and retain employees.

The promise of significant tax reductions by the Government may help to square the circle. But employees will still look for a much bigger slice of the cake, and it remains to be seen how much the employers are willing to give in an effort to strike a new deal.

Jane Suiter is at jsuiter@irish- times.ie