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«Why don’t governments need trade unions anymore? The death of social pacts in Ireland and Italy Downloaded from at ...»

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In addition to the political instability imposed on the Fine Gael– Labour government by trade unions, there was also significant industrial unrest directed at employers. From 1970 to 1980 roughly 600 000 days were lost annually to industrial action (Labour Relations Commission Annual Report, 2009). From 1980 to 1990, there were about 400 000 days lost, which is one of the highest levels recorded in the OECD at the time; this came to a halt after 1987 (Roche, 2009). It was this disruptive capacity that induced the newly elected Fianna Fail government in 1987 to reject the approach of Fine Gael and seek a centralized political deal with ICTU. This was particularly important after the 1987 election, which resulted in a significant shift in Why don’t governments need trade unions anymore? Page 11 of 23 urban working-class support towards Fianna Fail (Laver et al., 1987). The government needed the ICTU to get a fragmented union movement to accept wage restraint in order to generate the stability for an export-led economic recovery based on attracting foreign direct investment, particularly in the aftermath of the 1986 currency devaluation. But trade unions would only change their preference for wage militancy and industrial unrest if they were granted political access to inuence the fiscal policy of the state.4 The new Fianna Fail Prime Minister, Charles Haughey, negotiated a 3 year naDownloaded from http://ser.oxfordjournals.org/ at University College Dublin on September 19, 2014 tional tax-based incomes policy with the ICTU in late 1987. The deal, named after the FF election manifesto, Programme for National Recovery (PNR), was underpinned by the 1986 National Economic and Social Council (NESC) report, Strategy for Development. This report, previously ignored by the FG government, argued that the Irish crisis was a direct outcome of a divergence in monetary, fiscal and wage policy. The advice to Fianna Fail was that if Ireland wanted to mirror the success of other small open economies in Europe (specifically citing the Netherlands, Austria and Sweden) then it was necessary to adopt an integrated and coordinated response to the crisis with the ICTU (Culpepper, 2008; Regan, 2010). From the perspective of the government, a centralized deal would shift trade unions away from ‘protesting in the street’ and into a problem-solving process of ‘strategic economic management’. This is what occurred under the PNR in 1987, followed by the Programme for Economic and Social Progress (PESP) in 1990.

Fianna Fail recognized that the trade union movement was more than a narrow lobby group and had the political capacity to derail the government’s weak electoral mandate. This is because the ICTU was in a position to mobilize popular consent among its affiliated unions, which represented over half the workforce, to provide support for government austerity while solving the problem of wage inflation.

Haughey negotiated the PNR and PESP with trade union leaders in full knowledge that the political deals would be put to a national referendum among the 60 affiliated trade unions spanning the public and private sector.5 The main unions in the ICTU put the PNR and six subsequent national wage agreements to an internal democratic vote (Baccaro and Simoni, 2008). All passed. This process of institutionalized pacting-ended trade union militancy, enhanced the authority of the ICTU as a negotiating partner and provided unprecedented political legitimacy to a weak government pursuing fiscal retrenchment. Mobilizing democratic consent across the public and private sectors while helping to solve the problem Interview with Peter Cassells, General Secretary Irish Congress of Trade Unions (ICTU) (1989–2001).

Interview with Bertie Ahern, Minister for Labour at the time, and subsequently Prime Minister (1997– 2008).

Page 12 of 23 P. D. Culpepper and A. Regan of wage restraint provided the carrot that led Fianna Fail to incorporate trade unions into public policymaking.

Industrial relations conflict, inflation and the loss of competitiveness associated with free-for-all wage bargaining compelled the FF government to centralize collective bargaining (Roche, 2009). The process of internal referenda ensured that the ICTU delivered their side of the bargain: national wage restraint and industrial peace. In return they got a seat at the table to implement government policy. This trade union influence was reflected in the establishDownloaded from http://ser.oxfordjournals.org/ at University College Dublin on September 19, 2014 ment of the Central Review Committee (CRC), the executive wing of social partnership, specifically set-up to monitor the implementation of the PNR and PESP agreements. The CRC reported directly to the Prime Minister on a quarterly basis, providing the ICTU with unprecedented access to the corridors of government power and marking a fundamental change in how the state negotiated with trade unions. Trade unions were now publicly promoted as ‘national problem solvers’.6 What the ICTU could offer government during this period was stability.

It could refrain from industrial action, negotiate reform and get its members to comply with wage restraint through a process of internal referenda. Second, the ICTU could forebear from mobilizing public opinion against government cuts in public expenditure. But both of these power resources (carrot and stick) were dependent upon ICTU having the legitimacy to be considered a representative of all working people. Trade unions did not consider that a narrowing of their membership to the public sector was a problem because they thought social partnership was now the default position of Irish politics and policymaking.

3.1 The Eurozone crisis and the exclusion of trade unions from policymaking From 2008 to 2009 an FF minority government under the Prime Minister Brian Cowen eviscerated social partnership in Ireland and unilaterally cut public-sector pay twice, followed by legislation to cut the minimum wage and deregulate collective bargaining (Regan, 2012, 2013). In response the ICTU attempted to mobilize public opinion against government austerity by organizing a 1-day work stoppage.

The strategy backfired when a vociferous mass media campaign was launched portraying trade unions as a public-sector cartel holding the government ransom (Roche, 2013). An analysis of opinion and editorial commentary in the print media during the final quarter of 2009 concluded that nearly 90% of press coverage Interview with Padraig O’hUiginn, secretary general to the Prime Minister (1986–1992); the same point was reiterated in interviews with subsequent secretary-generals, particularly Dermot McCarthy (2000 – 2011).

Why don’t governments need trade unions anymore? Page 13 of 23 was ‘anti-union’ (ICTU, 2010). Unlike 1987 – 1992, trade unions were now considered a public-sector interest group, lobbying government in defence of ‘overpaid bureaucrats’ and ‘labor market insiders’.7 The weakened ability of Irish trade unions to engage in both wage militancy and public opinion mobilization is intimately bound up with a narrowing of their membership and the associated decline in collective bargaining coverage, which collapsed from approximately 70% in 1981 to 44% in 2010 (Regan, 2012). In turn this can be traced to a decline in the strategic importance of unionized employers Downloaded from http://ser.oxfordjournals.org/ at University College Dublin on September 19, 2014 in domestic industries. From 1981 to 1987 most of the export-sectors in the Irish economy included Irish firms with unionized employers and employees (Hardiman, 1988). The era of US led high-tech FDI had not yet arrived. These unionized firms had a close relationship with the semi-state commercial sectors and were organized into two different employer associations: the CII and the FUE.

These were subsequently merged to form the Irish Business and Employers’ Confederation (IBEC), in order to facilitate social partnership with the ICTU and government.

The PNR and PESP agreements had covered over 70% of the workforce. By 2008 collective bargaining coverage in Ireland had declined to less than 44%, the third lowest in the Eurozone after Estonia and Slovakia (Visser, 2009).

Whereas in the mid-1980s more than 400 000 days were lost to strike action, by 2008 this figure had dropped to 26 000. Remarkably, in the midst of the structural adjustment programme adopted in the wake of the crisis, there were only eight strikes in 2011, with fewer than 3700 days lost to industrial action. This is the lowest ever recorded in Ireland. Overall trade union density had declined to 31%, a figure that masks a steeper decline and significant variation across the private and public sectors. In the public sector, overall density remains just under 80%. Aggregate density in the private sector has fallen below 22%. In this context employers and government have nothing to fear from trade unions. From the perspective of government, centralized collective bargaining is no longer considered necessary for solving the problem of wage restraint.

But the narrowing of collective bargaining coverage does not alone explain why Irish governments no longer need the ICTU. The Fianna Fail government introduced two public-sector pay-cuts from 2008 to 2010 despite trade union density rates in the public sector remaining constant since the late 1980s. This was justified by an internal report by the Department of Finance that blamed the asymmetric inuence of social partnership for a decline in wage competitiveness, pro-cyclical taxes and increased public expenditure post-2002 (Regling and Watson, 2010).

´ The Fianna Fail government accepted this report’s recommendation and chose to act unilaterally because no union affiliated to ICTU would be able to ballot Interview with Department of Public Expenditure and Reform.

Page 14 of 23 P. D. Culpepper and A. Regan their members on pay-cuts.8 This removed the legitimizing effect of internal democratic ballots within unions for government: the NESC was sidelined, social partnership committees shut down and parliamentary subcommittees re-emerged as the main arena of decision-making within government. Trade unions were now considered part of the problem, not the solution.

During 2009–2011 public opinion turned even further against trade unions when it emerged that many union leaders were earning CEO-type salaries. This was followed by accusations of corruption in the Irish vocational and training agency and Downloaded from http://ser.oxfordjournals.org/ at University College Dublin on September 19, 2014 ‘misplaced’ internal SIPTU training funds. Internal feuds began to open up between public-sector unions representing high earners and those representing the 24/7 ‘Frontline Alliance’ (healthcare and defence workers). During two anti-austerity protests in 2009 the leadership of the ICTU and SIPTU were booed off stage. The term ‘trade union’ had become shorthand for ‘public sector cartel’ in much of the print and broadcast media (Irish Times, 2010, 2013). But it was the close alignment of trade ´ union leaders with the public policies of Fianna Fail—which suffered a historic defeat in the 2011 elections, losing over 60 seats in parliament—that finally killed off the legitimizing effect of social partnership for politicians in Ireland.

The outcome of all this is that the ICTU has lost the legitimacy to be considered a social partner by the state. Between 2007 and 2010 public distrust in trade unions increased by a staggering 21 percentage points (from 32 to 53%), the sharpest increase of all EU member-states. Since 2011 the newly elected FG-Labour government has chosen to continue the path of only negotiating with individual public-sector unions on a bilateral basis through the Department of Finance.

4. The rise and fall of social partnership in Italy In the early 1990s, Italy faced pressing problems of controlling labour costs and reducing public spending. Its political party system collapsed in the wake of the Tangentopoli scandals, and a series of technocratic governments ruled the country and adopted significant reforms of the political economy. Unions were integral parts of strategies of reform involving wage restraint and public spending on pensions. In the industrial relations arena, unions were the preferred negotiating partners of the employers’ association, which wanted to bring plant-level militancy and wage drift under control. In pension reform, a new government of the right, led by Silvio Berlusconi, tried to reform the pension system without unions and was brought down in part over the issue. One year later, another technocratic Even if trade union leaders had accepted pay cuts they would not have been able to get their membership to democratically vote on and accept this. Simultaneously, trade union leaders were aware that there was no appetite for strike action among their members (interview with Jack O’Connor, President of ICTU, 2009– 2011).

Why don’t governments need trade unions anymore? Page 15 of 23 government—but one sympathetic to the left—passed pension reform by making unions an integral part of the policymaking process.

The first significant reason unions played this prominent role in both negotiations was because of the costs they could impose on employers and on governments if they were excluded. The Italian wage negotiations of the early 1990s were about how to replace the scala mobile with some sort of sectorally bargained system that would allow employers to avoid plant-level wage drift and thus improve their international competitiveness (Culpepper, 2008). Wage drift was a threat because local Downloaded from http://ser.oxfordjournals.org/ at University College Dublin on September 19, 2014 employers feared the capacity of organized workers to use their shop-floor power to demand wage top-ups. Unions themselves were challenged at the local level by more radical organizations, the COBAS (Rhodes, 1998). Italian employers wanted to sign deals with national unions, based on an agreed criteria of international competitiveness, in order to protect firms from these pressures.

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