Workers will have to accept lower pay increases to safeguard their jobs, the business and employers group Ibec has told the social partners.
Speaking at the social partnership plenary session in Dublin Castle this morning Ibec director general Turlough O'Sullivan warned that the new national wage agreement must not undermine Irish competitiveness.
Taoiseach Bertie Ahern
Taoiseach Bertie Ahern is chairing today's talks which begin with a review of the social partnership agreement, Towards 2016.
Unions have already indicated their dissatisfaction with the implementation of employment safeguards and the high inflation rate which they say has cancelled out the 10.4 per cent pay increase over 27 months agreed at the last round of pay talks.
Mr Ahern in his opening address said progress had been made on worker protection such as new legislation, the creation of the National Employment Rights Agency, an additional 59 labour inspectors and additional posts at the Rights Commissioner and industrial relations bodies.
And he assured unions: "While we all appreciate the imperative to price and position ourselves competitively in the challenging global marketplace, we do not want to see people building competitive advantage based on poor wages, casual labour, low health and safety standards or other poor compliance practices."
Further protections will be in place in the coming weeks, he added. But warned that Towards 2016 contained provision for adjusting expectations in line with lower-than-expected economic growth.
"Our goal should be to mitigate the economic risks which we face and to strengthen the competitiveness and productive capacity of the economy," he said.
Mr O'Sullivan said pay rates were running ahead of productivity.
"On an after-tax basis, average pay has increased by 14.4 per cent over the 27 months, and this excludes the increases in mortgage interest relief.
"Pay rates in Ireland have been growing at twice the pace of those in other euro area countries. This is simply not sustainable. In the upcoming negotiations, pay moderation is an urgent requirement. If this does not happen jobs will be lost and everyone will eventually lose out," Mr O'Sullivan said.
Tánaiste and Minister for Finance Brian Cowen supported the call for wage restraint as part of a strategy to improve competitiveness. His budgets had mitigated the external pressures on the cost of living and negotiations should account for the recent fall in inflation which was projected to continue, he said.
He told the session the decline in construction activity was part of a re-balancing of the economy towards export-led growth. Despite a recovery expected in 2009, improved short-term productivity was needed to make a smooth transition from an economy heavily reliant on domestic demand.
"The Government continues to implement measures to enhance productivity - investment in human and physical capital under the National Development Plan is just one example. Nevertheless, it is crucial that wage expectations are kept in line with the rapidly changing economic environment," he said.
The terms of the pay agreement for the private sector are due to expire from March and at the end of September for the public sector.
Today's talks begin a process that could stretch into April and sure to be contentious. The State's largest union Siptu has yet to agree to participate in the new round of pay talks.
General president Jack O'Connor said today that Ireland has one of the highest costs of living and productivity rates in Europe.
And he criticised senior managers who urge pay restraint while "awarding themselves multiples of the increases workers have been receiving over the past few years".
Productivity growth would best be sustained by implementation of education and training programmes for the 500,000 workers without third-level qualifications, Mr O'Connor added.