In Dublin Castle yesterday, the Taoiseach opened the talks on a new national pay agreement by promising social inclusion, the promotion of enterprise and a tough line on public sector pay - just what much of his audience wanted to hear. But the trade unions talked of a 10 per cent pay increase and employers' representatives were quick to dismiss this. The shadow boxing will end soon but there can be little doubt that the 19 groups at the talks will find it -extremely difficult to reach agreement by the target date of the year end.
In one sense there should be a broad consensus that a new agreement, of almost any complexion, is in everybody's interests. In terms of job creation, the comparison between the economy's performance with and without pay agreements is striking. The absence of pay agreements did not deny growth to the economy but it came with lamentable levels of job creation. By contrast, the number of people at work rose (admittedly helped by low inflation and interest rates) by more than 100,000 between April 1994 and April of this year. Employment during the lifetime of the Programme for Competitiveness and Work rose by over 130,000; this is more than the cumulative increase in the preceding 20 years. Impressive stuff.
And yet there were things that the PCW did not deliver. It failed to reduce significantly the tax burden on the lower paid. It also, much more than the PESP, gave rise to envy of redundancy proof public sector employees. While many private sector employees did not get a three per cent local bargaining increase (available, in theory, for productivity improvements), some groups of public sector employees got significantly more than three per cent. These may have been deserving cases, but it still rankled, as did the fact that public sector numbers, despite promises to the contrary, continue to climb up in the last eight years by 10 per cent to 216,000.
The PCW also did precious little for the long term unemployed. Their plight is not helped, it must be said, by emigrants coming back to snap up jobs. Last year, 33,000 people left the country but 38,000 returned. Also, there is a surge in female job seekers. Last April there were an extra 33,000 women at work compared to a year before while the increase for men was 7,000. Agriculture, not surprisingly, showed a drop of 6,000 jobs but it was made up of a drop of 10,000 men in the sector and an increase of 4,000 women. Add all this to the income trap that hits unemployed persons moving into low paid jobs and it is no wonder that long term unemployment remains stubbornly high.
Nobody would suggest that simple solutions exist, but the problem can be tackled and a sizeable reduction in PAYE tax for the lower paid would be a good place to start. The Minister for Finance, Mr Quinn, will be understandably reluctant to give any guarantees of tax reductions in advance of the next Budget or of further Budgets in which he might have a part to play. But a promise of tax reductions will help greatly to seal an agreement which will continue economic growth; it will increase equity in the tax system and it will assist many long term unemployed to move into jobs with realistic take home pay. Time to be brave, Mr Quinn.