From Socialist Voice, June 2011

Employment report will be shelved in pursuit of failed strategy

The recent Duffy-Walsh review of the employment regulation orders (ERO) and registered employment agreement (REA) wage-setting mechanisms has backed reform rather than abolition. Yet it remains to be seen whether this stance will survive both the Government and the EU-IMF, as well as imminent legal onslaughts from hard-nosed employers.
     The report’s conclusion, which favours retaining the ERO and REA mechanisms—notwithstanding reforms—is likely to sit uncomfortably with those neo-liberal ideologues who had hoped that the review would give assent to the elimination of both.
     General estimates suggest that between 150,000 and 205,000 Irish workers are covered by the JLC system, with between 61,900 and 78,700 covered by REAs. Workers covered by JLCs account for 15 per cent of private-sector employees (significant proportions of whom are employed in the retail sector), while the REAs account for a slightly less than 8 per cent of private-sector employees (mostly in the construction and electrical trades).
     The Duffy-Walsh Report actually contradicts much of the ideological hysteria that has come from employers’ quarters on the EROs and REAs. It found, for example, that workers covered by the agreements do not earn a premium compared with workers in “uncovered” jobs. Employers have contended that the present arrangements act as barriers to job creation and retention.
     However, the review found that lowering the JLC rates to the level of the minimum wage is unlikely to have a substantial effect on employment. Therefore, the effect on employment of cutting the wages of low-paid workers will in fact have a negative impact on the public finances.
     As well as the direct taxation effects there will also be increased payments of family income supplement and reduced VAT receipts. The real effect will be that the exchequer will end up subsidising employers.
     Within the Government there are clearly those in Fine Gael who are disappointed that the report did not back their preferred agenda. It is clear that Richard Bruton is not satisfied with the report. His brief response to it concentrated not on the core recommendation that the system be retained with some reform but on the differentials between sectoral rates in Ireland and Britain, which is referred to in the document. Bruton’s strategy is ultimately to decommission the ERO and REA, akin to what the Thatcher government in Britain did with the Wage Councils in the 1980s.
     More importantly, however, the report will do nothing to satisfy our new masters—the EU and IMF—and therefore will probably be shelved. The IMF staff report on the bail-out deal from 4 December last year proposed “a review of sector-specific minimum wage agreements, with a view to their elimination.” There are also impending threats from six constitutional challenges to EROs or REAs, or both, the most recent one lodged by the Coolmore Stud in Co. Tipperary (owned by none other than the wealth baron John Magnier).
     The thrust of these attacks dovetails with the overall strategy of the political elite. To correct the fiscal imbalance in the economy the Government has sought to reduce its reliance on heavy borrowing by seizing a greater proportion of working-class income (through taxes, pay cuts, and reducing Government investment).
     However, such a strategy—pursued in subservience to international finance—has now caught the seoinín political elite in a fiscal trap. As the consumption capacity of the working class declines, Irish business itself has had little need to expand investment, and its capital remains idle (indeed corporate saving has increased during the slump). The economy will continue to stagnate.
     An independent economic and political strategy, based on the needs of broad strata of Irish people and not those of international finance capital, should be seeking to access corporate wealth to at least mediate our current crisis, whether this be through wealth or windfall savings taxes.
     This would be the basis of a more robust jobs and investment strategy than the meagre “revenue-neutral” Government initiative unveiled last month will allow. Attacking the low-paid will do nothing to solve the economic crisis.
     However, articulating a democratic strategy should not be based on the pain-free panaceas of the ultra-left. This crisis is of such magnitude that it is probable that a resolution will result in all sections of society feeling a degree of fiscal pain.
     In the immediate term, the task is to make those sections of society who can bear the pain do so as the first step in any progressive reconstruction.

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