Workers Have Spoken

66 percent of public sector workers voting on the Croke Park 2 proposals rejected the deal.  Of the 20 unions participating in the ballot, 14 rejected the deal and 5 accepted (we don’t have information on the vote from Veterinary Ireland).  The result was overwhelming and conclusive.

There is one argument going around that says if four percent of public sector workers in SIPTU had switched from rejection to acceptance, then Croke Park 2 would have passed.

However, this overlooks the fact that two-thirds of public sector workers rejected the deal.  A small change in any particular union would make no difference in the overall vote.

Below we break down the results proportionately.  For instance, under the bloc-card system, if 60 percent of workers in a union vote to accept the deal, then 100 percent of the card votes are cast for acceptance.  However, this doesn’t reflect the vote.

If we break down the result proportionately, we get an accurate reflection of how public sector workers voted.

As seen, 66 percent – two-third – rejected this deal.  This goes beyond ‘tweaking’ a new deal.  This is about a fundamental rejection of the Government’s austerity and wage-cutting programme.

Now is the time for all trade unions – public and private – to put forward a progressive alternative to austerity – an alternative which benefits all people:  the unemployed, those on social protection, the low-paid, households struggling with debt an deprivation, and domestic business suffering from lack of demand.

And with two-thirds of public sector workers rejecting the austerity deal, we have a strong foundation to start from.

UNITE Will Not Accept Croke Park 2 if Members Reject It

UNITE has written to ICTU’s Public Services Committee stating that in the event of UNITE members rejecting Croke Park 2, the union will not be bound by a majority decision of the Committee to accept the proposals.

You can read the letter of Jimmy Kelly, UNITE’s Regional Secretary, here: Letter to Public Services Committee.

In short, if our members reject the deal, we will not accept the deal.

Croke Park 2’s Attack on Women and Family Life

The unions opposed to Croke Park 2 have launched an Equality Audit of the proposals.  It focuses on the impact of changes in working conditions  – issues which have not received as much attention as the pay-cut elements of Croke Park 2.   Which is unfortunate as this audit shows is that these proposed will have a profound impact on women in particular, and family carers in general.  This is why Croke Park 2 has been rightly labelled as anti-women and anti-family.

The Equality Audit is written by Niall Crowley who, as former head of the Equality Authority, is particularly well-placed to assess the impact of Croke Park 2. His key points are:

• The provision for additional hours will have a higher impact on women – and for women and men with caring responsibilities.  This could force women and carers out of the workforce.

• There will be a similar impact of the provision regarding work sharing which will be reduced.  Women and carers will be disproportionately hit.  Furthermore, there will be a negative impact on productivity.

• Flexi-time arrangements, again, will impact more negatively on women and carers.  That the Croke Park 2 rules out any reference to family circumstance or the right to appeal to a third part means employees will have even fewer rights to maintain family-friendly working hours.

• There is a potential loss of productivity arising from the proposals as the loss of work-sharing opportunities and flex-time, combined with more working hours will reverse the gains that these working practices produced in the past.

The effect of all this will be a management driven by spurious  and highly misleading balance-sheet considerations which will disguise the loss of productivity in the public sector, impose costs on to workers, drive many women and carers out of the workforce, and end up with a degraded public service.  This is quite an achievement for a ‘deal’ that pretends to drive efficiencies.

What’s even more intriguing is the prospect that this deal could run afoul of the law.  The Equality Audit states:

‘These proposals discriminate on the family status ground because they will disproportionately disadvantage men and women with caring responsibilities in the public sector . . .The Employment Equality Acts prohibit direct and indirect discrimination on a number of grounds including gender and family status. It could further be a matter for the European Commission to adjudicate on, given the provisions of the equal treatment Directives on the ground of gender.’

That Croke Park 2 would give rise to a legal challenge in the domestic courts and / or the EU Commission shows just how potentially discriminatory and unequal these proposals are.

The Equality Audit is a major work – and not only for the its assessment on the impact of Croke Park 2 proposals.  In its forensic examination of the issues, it provides a wealth of data on the state of working life and, so, gives insight into more equitable strategies to improve productivity that is worker-centred.  In short, if the goal is to improve efficiency, then you start by making work more amenable to the family and life circumstances of employees in the private and public sectors.

Instead, Croke Park 2 threatens to turn back the clock – all the way back when women were blocked from participating in the labour force.  That could well be its lasting legacy if it is allowed to be implemented.

Below comes from the Equality Audit’s summary section.  But if you have a chance, please read the full report which can be accessed here.

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Equality Audit:  Assessment of Impact of the Labour Relation Commission (LRC) Proposals

Additional Hours

This audit finds that additional working hours will disproportionately and negatively impact on women and will disadvantage both men and women with caring responsibilities. Furthermore, the diminishing commitment to flexibility for work life balance that is reflected in other parts of the LRC proposals suggest that flexibility will not be available to mitigate the impact of these measures. This in turn could serve as a push factor for people with caring responsibilities to leave the workforce with a disproportionate incident of this impact on women.

Work Sharing

A reduction in access to and take up of work sharing arrangements will disproportionately and negatively impact on women and will disadvantage women and men with caring responsibilities and could act as push factor to leave the work force which disproportionately impacts on women. This is particularly true of the insistence in the proposals that work sharing patterns should not be less than 50% of full working hours. The available data identifies that women make up the vast bulk of those working less than 29 hours in a week. These effects can be particularly negative and have longer term consequences for women working in the health sector. The supportive culture and ethos surrounding the availability and take up of flexible working/work sharing arrangements that currently prevail will be damaged on foot of the LRC proposals and will diminish the productivity gains from the availability of these arrangements.

Flexible Working Arrangements

Flexible working arrangements are important in addressing work life conflict for women and men caring for young children. A reduction in the availability of or conditions for flexible working arrangements and changes in the core time bands will disproportionately and negatively impact on women and will disadvantage men and women with caring responsibilities. The absence of any reference to the need to take account of any possible impact on family circumstances or the right of appeal to a third-party adjudicator in these proposals is also of note. The loss of access to flexible working arrangements as staff progress into senior management positions will disproportionately and negatively impact on women also.

Conclusion

The audit concludes that the proposed changes to flexi time and work sharing, redeployment and increased hours at work hold the potential to have a disproportionate and negative impact on women employed in the public service. The audit concludes that these proposals discriminate on the gender ground because they will disproportionately disadvantage women in the public sector and will deepen gender inequality. The audit finds that these proposals also discriminate on the family status grounds because they will disproportionately disadvantage men and women with caring responsibilities in the public sector.

The audit finds that, based on the research available, flexible working /work sharing arrangements actually enhance productivity which is the stated objective of the LRC proposals and that no savings are identified if access to and conditions relating to these arrangements are diminished.

The audit further states that the potential impact of the LRC proposals must be mitigated if they are not to deepen inequality for women and to disadvantage men and women with caring responsibilities.

What is the Government Thinking? Is it Thinking?

It is difficult at times to understand what the Government is at.  The weekend papers were full of analysis showing why growth was essential, if only to avoid another banking crisis (the IMF has warned of a €16 billion black hole if growth does not return to the economy).  And yet Minister Brendan Howlin is  threatening a 7 percent across the board-cuts in public sector wages if workers don’t vote for the current pay-cut proposals.  There is nothing more certain to ensure we don’t return to growth than to cut wages.

We’re back in recession, according to the CSO (though you wouldn’t know this from reading media commentary which claims growth is on target).  This occurred in the latter half of last year – the latest period we have data for.  So what’s been happening so far this year?  Are there signs of recovery on the horizon?

• Retail Sales Index has fallen in the first two months of this year.
• Industrial production is down (though there was a marginal increase in February).
• Property prices are back in decline – having fallen in each of the last three months.
• Manufacturing exports (which makes up most of our exports) fell in January by an annual 17 percent in value.
• New vehicles licensed are down in the first two months by 14 percent over the first two months last year.
• The Monthly Services Index fell in both January and February of this year.

The Live Register has fallen by 3,000 in the first three months of this year but how much of this is due to people moving into labour activation schemes, returning to education or just emigrating we don’t know.

So, we returned to recession late last year.  In the first two months this year important indicators are moving downwards.  This may not continue, but with warnings about a tough year for exports, with a range of budgetary measures yet to hit in full (property tax, spending cuts) – the economy will struggle.

So what does the Government do with this tinderbox of an economy?  It throws the firecracker of a significant pay cut on to the pile – with all the implications for the consumer economy, arrears and tax revenue.

And they are threatening a cut that the ESRI shows is the least effective in reducing the deficit.

It is difficult to fathom what the Government is up to – unless they are determined to reduce the public sector regardless of the damage it will have on workers, the private sector and the economy at large.  In other words, it only makes sense at an ideological level.  Because in economic terms, it is madness.

An Alternative to a Chilling Threat

There was something chilling in Minister Ruari Quinn’s comments after the TUI conference:

‘The economic gap, the financial gap in Brendan Howlin’s figures will not disappear because of a vote that rejects the proposals that have come out of the negotiations. The alternative is that if we have to find the money elsewhere, I’ve only one other place to go and that’s front-line services. ‘

So if public sector workers reject cuts in pay and working conditions, the Government will take the money out of hospital and health care, classrooms and children’s education, policing and fire-fighting.  This is holding those in need as ransom for a vote.  It is chilling.  It is cynical.  It is also economically irrational.  For there are other places – better places to go to close the ‘financial gap’; actions that would actually improve the economy or at least not damage it as much wage and job costs.

Alternative 1:  A Special Investment Programme

UNITE and the trade union movement have been campaigning since the crisis began for a special investment programme.  The ESRI (John Bradley and Gerhard Untiedt) has recently published the results of a modest investment programme which can be funded without any extra borrowing.   They proposed a temporary three-year programme of €1 billion in the first year, €1 billion in the second year and €500 million in the third year.  What did they find?

An investment programme is far better at reducing borrowings (the deficit) than cutting wages.  Why?  Because it puts people back to work which increases tax revenue and reduces unemployment costs; in other, words it grows the economy.  An investment programme ‘saves’ more than Croke Park 2 whether its based Minister’s estimate or UNITE’s estimate which uses Michael Burke’s more rigorous analysis.   And an investment programme doesn’t cut front-line services.

How do we pay for this investment programme without extra borrowing?  That’s easy.  At the end of last year, the Government had nearly €30 billion in cash and National Pension Fund assets on hand.  That’s right – nearly €30 billion; at a time when the economy is starving, the Government is hoarding food.  Even if we used a small fraction of that cash mountain to fund investment, the Government would still be sitting on a cash mountain.

But it doesn’t stop there.  What are the comparisons when we take look at the impact on the economy?

Investment grows the economy, Croke Park 2 cuts growth; investment grows employment, Croke Park 2 cuts job creation.  That is the key to sustainable and ‘growth-friendly’ deficit reduction.

Alternative 2:  Taxing Wealth and High Income Groups

Let’s look at another way to reduce the deficit without cutting wages or front-line services.  The CPSU’s General Secretary, Eoin Ronayne, argued that a third rate of tax for high income groups could be introduced, rather than cutting wages.  Similarly, UNITE has argued for a wealth tax.  Let’s compare these two measures with Croke Park 2.

All measures reduce growth and employment.  However, as seen, both a 3^rd tax rate and a wealth tax are less damaging to growth and jobs and, therefore, better at reducing the deficit.  There are two things to note:

• First, with both the 3^rd tax rate and a wealth tax, the fiscal adjustment is €500 million.  For Croke Park 2, the fiscal adjustment is nearly €1 billion.  This means that a smaller adjustment is needed to get the same deficit reduction if the Government opted for taxation on high income groups.

• Second, the ESRI data used is for income and property tax that is applied to everyone (they don’t have data for taxation on high income groups only).  We can reasonably assume, since a 3^rd tax rate or wealth tax only impacts on a small number of high earners, the deficit reduction will be more because the impact on growth and employment will be less.

So there we have it.  Here are two far superior alternatives to Croke Park 2 – investment and/or taxation on high income groups.   When those who oppose Croke Park 2 are asked, ‘What would you do?’ –  the answer is simple.

Grow the economy through investment

Introduce fiscal adjustments that do the least damage to the economy

We don’t need to hold health, education, security and other public services to ransom in order to get a vote for a deeply flawed policy.

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NOTE:  We use the ESRI Hermes data to assess the impact of Croke Park 2, except for GDP when we use the Minister’s own assessment in his letter to Jimmy Kelly, UNITE’s Regional Secretary.

The War on Wages Spreads to Social Protection Payments

Francis Byrne of OPEN made an excellent point in a tweet regarding the previous post on the war on wages:

‘Which will also of course inevitably provide a rationale for reducing weekly SW (social welfare) payments.’

This is a crucial point.  Cutting wages hits social protection recipients – unemployed, old age, single parents, the invalid and sick – in two ways.

First, there is a reduction in tax revenue.  In the private sector when pay is cut by €100, the state loses nearly €42 ((nearly €63 if the employee is in top tax rate).  In the public sector the loss to the state is even higher given the pension levy and pension contributions.  This leaves the Government with less revenue and, so, puts pressure on spending.

Second, wage cuts can drive down workers income towards social protection levels.   Using the ‘incentive-to-work‘ argument, some will argue that social protection must be cut so that work ‘pays’.

In short, driving down people’s incomes impacts on everyone in society – and not just those in work.

We are seeing this at work already, albeit below the radar.  Social Protection rates are being cut in real terms; that is, after inflation.

Despite the Government’s claims that they are ‘protecting social protection’, the fact is that social protection rates are being cut in real terms.  A single person will have found their payments cut by €375 after Budgets 2012 and 2013 while a couple with no children will have suffered a €624 cut.  For households with children, they have taken a double hit – from inflation and cuts in Child Benefit; for a couple with two children their income has been cut by over €1,100.

If social protection payments were ‘protected’, there would need to be a 3.8 percent increase (more for households with children to make up the Child Benefit cut) – just to keep pace with inflation.

These real cuts explain why deprivation levels are so high – nearly one-in-four of the total population suffer multiple deprivation experiences; and that was in 2011.  We should expect this dismal statistic to rise in 2012 and, again, in 2013 as the real cuts impact on living standards.

This war on wages – or more properly, the war on incomes – is taking its toll on everyone; in particular, those in society with the lowest incomes.  Another round of pay cuts – staring with Croke Park 2 but extending throughout the economy – will result in more reductions in living standards.

And when the economy, which is already back in recession, takes another turn for the worse, why should anyone be surprised?  Living standards are the first casualty of austerity.

The War on Wages

It is now clear that a systematic attack on wages is currently underway.  This attack stretches across the private and public sectors, aimed at both low and higher income groups.  It is nothing less than an attempt to re-order the economy into a low-wage, high profit economy – with the Government playing a leading role.

Croke Park 2 is a crucial part of this wage-cutting strategy.  With the economy having returned to recession – and with key indicators (retail sales, industrial production, merchandise trade surplus) indicating that the decline has continued into the early part of this year – cutting wages makes no sense except as part of a long-term strategy to depress wages.

But it is not just the public sector.  The Minister for Finance recently called for wages in the covered banking sector (AIB, Permanent TSB, Bank of Ireland) to be cut despite the fact that 40 percent of employees earn an average of €30,000 per year or less.

Private sector employers are getting in on the act.  In the low-paid sectors, workers’ wages have been falling back to the national minimum wage level since the Joint Labour Committees (JLCs) were, first, struck down by the High Court and, then, reconstituted in a much weaker form by the current Government.

Even in companies with high profits, employers are seeking to cut wages.  The Irish Independent reported that Boots is targeting workers earning over €12 per hour, claiming they are ‘over-paid’.

In all this Croke Park 2 is key.  The Government, as the largest employer in the state, provides signals to other employers through what is called ‘the demonstration effect’ – that is, what the Government does, others follow.  When the Government ripped up the last national agreement in late 2008, IBEC followed suit a few weeks later.  Strangely, IBEC didn’t do this to protect vulnerable employers who couldn’t afford wage increases for they were already protected under the national agreement through the ‘inability to pay’ clause; IBEC walked away from the national agreement to help employers who could afford to pay.  This signalled a clear intention to use the recession as an excuse to cut wages.

When the Government froze wages in the first Croke Park agreement (in effect, cutting wages in real terms – that is, after inflation), employers in the private sector, again, followed suit though organised workers have had some successes in particular companies and sectors.

This is where Croke Park 2 fits in.  It’s not just about cutting wages.  The Government is giving key signals to other employers by:

• First, requiring employees to work extra hours with no additional pay:  we should expect this demand to be taken up in the private sector (and early anecdotal evidence suggests this is happening).  More work, no extra pay could become a common demand throughout a number of domestic sectors if Croke Park 2 is successful.

• Second, reversing ‘labour-friendly’ work patterns such as flexi-time – which features in Croke Park 2 – could, again, start a trend in the private sector.

These signals are important, as shown in the treatment of the Sunday premium.  The premium was first targeted in the low-paid sectors covered by the JLCs.  Having successfully removed the premium from the protection of collective bargaining among the low-paid, this ‘trend’ is now moving to the public sector.  A number of vox pops have featured in the media where people claim they don’t get any extra compensation for working Sunday even though this is against the law.  These are mainly workers in the domestic sectors (offices, shop floors, etc.) where there is no trade union representation.  So with Sunday premium protection removed from the low-paid sectors, with the premium being cut under Croke Park 2, what chance of compliance throughout all sectors of the economy?  Not much.

We should be aware that the onslaught on wages is insidious. It doesn’t happen all at once; it doesn’t announce its strategy in a press statement or White Paper. It first starts in one sector and moves to another.  It can take the form of wage cuts, cuts in working conditions, cuts in hours worked.  However, it is done, wherever it starts, the end result is the same – a driving down of living standards.

The latest EU Commission report projects that real pay (after inflation) will fall each year up to 2015.  This doesn’t factor in tax increases or cuts in income support (Child Benefit) which will reduce disposable income even further.  Living standards are going to fall if current trends hold – and Croke Park 2 is a key instrument in ensuring this.

So when public sector workers reject Croke Park 2 they are not just protecting their own wages and living standards – they, too, are giving a signal, a signal that challenges the Government and private sector employers: that workers everywhere can resist the attack on wages.

Commentary in Service to Austerity

Over at Public Policy.ie there is an ‘assessment’ of Croke Park 2 (thanks to Tomboktu for pointing this out).  This type of assessment highlights all the problems with debate over policies and just serves up more of the ‘there is no alternative’ argument that has done such damage to the Irish economy.  It is ill-informed, full of unsubstantiated assertions, and employs a specious use of data to avoid facing up to the real issues.

After a summary of the measures, it claims that if wages are not cut the Government would have to:

• Cut social protection and medical cards, thus hitting the most disadvantaged even more.
• Cut capital spending which would ‘undermine the potential for future growth in the economy’.
• Increase taxation which could be regressive if it resulted in VAT increases, or drive up the marginal tax rate to one of the highest in the EU.

So there you have it:  if we don’t cut public sector wages, we’ll have to cut social welfare or investment; or increase taxes on working people.

First, there is no assessment of why the Government is missing their budgetary targets, no assessment of whether austerity is actually driving down growth and, therefore, destabilising public finances.

Second, there is no assessment of the impact on the deficit – in other words, how much would the Government actually save after the cuts:  no assessment of the impact on the consumer economy or private sector employment.

Third, the ‘alternatives’ the article serves up are clearly intended to justify a pre-determined conclusion; namely, we must cut wages.  Why not the alternative of increasing investment which would boost growth, employment and, so, tax revenue (while cutting unemployment costs)?  Why not the alternative of real reform where unproductive spending would be directed into productive spending?

It is in the area of taxation that the analysis reveals itself as ideologically driven.  It doesn’t consider the alternative of removing regressive tax breaks or introducing proper wealth taxes – that is, taxation on financial wealth which would have minimal impact on domestic demand.

It further claims that Ireland has the most ‘progressive tax system in the EU’.  It quotes from an OECD study which actually doesn’t measure progressivity in tax systems.  It examines the tax wedge (a labour cost analysis); it includes some social protection benefits but not most.  While there is not the space to go into this issue here, suffice it to say that if any argument has to fall back on this study it has pretty weak legs.

The Public Policy assessment goes on to claim –again, courtesy of the OECD – that increased taxation on income is more damaging than, say, VAT or property taxes.  What it doesn’t cite are the ESRI, NERI or the IMF which shows that spending cuts are more damaging than taxation in general.  If it did, it would undermine its own argument.

But the real clanger lies in the conclusion:  it cites median pay for employees (median is the point at which 50 percent earn above and 50 percent below – the mid-point, as opposed to the average) as being €28,669 in 2010.  It then uses a sleight of hand argument:

Thus the proposed public service pay reductions (other than in relation to overtime and premium pay) begin to take effect at a level which is over twice the median pay level of employees in the public and private sectors.

First, the reductions in higher pay make up on a small proportion of the total cuts – about 25 percent.  To use a small part of the pay cuts – while ignoring most –  to justify an assertion that the cuts don’t impact on average income earners is hardly befitting a ‘think-tank’.

Second, the median pay used above for employees refers to all workers – full-time, part-time, contract and agency.  In 2009, the CSO shows that the median pay for full-time employees (assuming 37 hours average working week) is closer to €37,000.

The fact is that the pay cuts will impact on employees who are in the bottom half of the full-time pay scale.  Indeed, the article admits this (and then ignores it) when it states that the ‘basic pay of Staff Nurses begins at just over €30,000.’  And, of course, this doesn’t count the tens of thousands of public sector workers who earn below this but will still be hit by the cuts.

This is what Public Policy.ie has contributed to the debate.  All it does is add to the austerity chorus – cut, cut, cut; if not here, then there; if not there, then somewhere else.

And we know where that ends up:  where we are now – in a double-dip recession with falling real incomes and rising levels of deprivation.

How the Cuts Will Affect You (or the Story of Burden Sharing)

The 24/7 Frontline Alliance commissioned an actuarial report on the impact of the pay cuts on different grades of public sector workers.  The headline figures have been circulating in public.  Here is the summary.

These are examples of different occupations at different grade levels with different working hours.  Therefore, these numbers could change even within individual categories.  But these are concrete examples of what the pay losses could amount to.

These are substantial cuts.  For nurses, depending on their working hours, losses could be as high as €5,000 a year.  The impact on living standards will be devastating.

Of course, the Government insists the burden will be shared.  And, yet, managerial and professional grades in the private sector experienced a €39 increase in weekly income in the last year – or an increase of over 3 percent.  Today, MANDATE highlights the news that management in Penny’s received a 2 percent increase while workers received nothing.

That pretty much tells the story of burden sharing.

What the Latest Economic Figures Tell Us about Croke Park 2

It is interesting that the big news of yesterday made so little news.  The CSO revealed that the economy fell back into recession in the latter half of 2012 but you will have to look hard to find much reporting on that.    Maybe it’s because this inconvenient fact cuts across the official narrative.  And while there was growth in three out of four quarters in 2010 and 2011, there was only one quarter of growth in 2012.  That, too, didn’t get much coverage.  That, too, may be inconvenient.

So what does this tell us about Croke Park 2?  It tells us that it is irrational to cut wages and, so, spending power with an economy falling back into recession.  Consumer spending and domestic demand has been stagnating for the last three years.

The domestic economy has flat-lined, suffering under a weight of austerity measures.  This year alone there is the impact of the PRSI cuts, the property tax along with cuts in Child Benefit, investment and public sector employment – which will reduce disposable incomes further.  Now the Government is proposing to cut the incomes of nearly 300,000 workers.  Would anyone be surprised to see this stagnation continuing?

Of course, the Government is not just going after public sector wages.  The Minister for Finance recently called for the wages in the covered banks to be cut by between 6 and 10 percent.  This is in spite of the fact that the recent Mercer Report revealed that 40 percent of all banking staff earn average wages of €31,000 and less.  Cutting wages – in the public, private or voluntary sectors – can only lengthen this stagnation.

The Minister for Public Expenditure and Reform has already admitted that Croke Park 2 could cut economic growth by up €800 million.  Economist Michael Burke argues it could be much worse. This will hit consumer spending hard.  Private sector workers in those sectors reliant upon consumer spending  (that is, most workers and businesses) will, in turn, get hit by falling turnover which will result in another round of pay cuts and job losses.

Croke Park 2 represents another twist in the continuing downward spiral.  And to do so when the economy has fallen back into recession is, quite simply, madness.