A few notes on ILR Towards a New Economic Plan

If I might direct your attention to Michael Taft’s Towards a New Economic Narrative at Irish Left Review.

A superb effort, and each point deserves serious consideration.

I’ll have more to add, I’m sure, but if I might start by observing something about one of the suggested measures in one of the points.

Additional measures to increase demand in the economy would be to:

* Introduce the right to collective bargaining: Study after study shows that those who negotiate through their unions earn more for the same job than those who don’t. IBEC warns the multi-nationals won’t wear this. The fact is nearly two-thirds of multi-nationals deal with the unions. It’s our home-grown enterprises that don’t recognise unions (and they wonder why they’re so unproductive). Organised workforces will strike better deals – again, win-win.

One thing worthy of note here, and scarcely publicised, is that multinationals themselves engage in collective bargaining against their collective workforces, but it tends to be called ‘benchmarking’. That is, the multinationals in a given sector meet up together, find out what each of them is paying workers, and then agree limits on pay.

When, at the level of the individual worker, it comes to the pay review cycle, and the worker gets a sub-inflation rate salary increase for having busted their ass for a whole year, the employer is able to say, well, that’s all we can afford this year, but we will conduct a review for next year to see if our salaries are competitive at market rates.

After colloguing with the other employers, they then come back to the employee and say, well, our salaries are competitive at market rates. This is true: an oligopsonist plays suppliers (in this case, workers) off against one another in order to drive costs down. So there is competitiveness: it’s just that it’s the workers doing the competing. So the very process of further immiserating the worker is thereby presented as the only means through which the worker’s situation can be improved. Which is nice.

A good description of the condition of such a worker can be found here:

His condition leaves him no time to receive the necessary information, and his education and habits are commonly such as to render him unfit to judge even though he was fully informed. In the public deliberations, therefore, his voice is little heard and less regarded, except upon some particular occasions, when his clamour is animated, set on, and supported by his employers, not for his, but their own particular purposes.

Which when you think about it is also a good description of what has been going on in relation to Fás etc. as discussed yesterday. Anyway, in case you didn’t know, it’s from Wealth of Nations by Adam Smith.

So collective bargaining makes sense for workers employed by multinationals. The doubt I have for its effectiveness here in Ireland is the extent to which multinationals can use excess capacity in other locations, allied with the threat of outsourcing, as a means of not recognising unions. Perhaps this echoes the claims Michael cites about IBEC above. On IBEC, and sticking with Wealth of Nations:

The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.

But even if these are good principles for listening to what they have to say, it doesn’t mean they are entirely wrong when they say the multi-nationals won’t wear this, though this depends largely on the nature of the work performed and the costs of sending it elsewhere. Simple transaction-based service jobs are ripe for that sort of thing. In theory, jobs of higher complexity should be more difficult to send elsewhere, but this isn’t so much down to the complexity of the tasks the job itself entails but the difficulty and risks involved in finding someone else to do it.

I wouldn’t dispute Michael’s figure of two thirds of multinationals engaging with unions, but I would suggest that the degree of engagement, in terms of the proportion of the overall workforce involved, is quite low, and concentrated in areas where there are either high business risks involved in finding someone else to do the jobs or where there is an outsourcing contract in which union presence is an undesirable legacy.

Couple of related things: it’d be interesting to know how many jobs in multinationals are presently protected by the state. I do know that contracts relating to grants provided to multinationals for locating in Ireland contain clauses on the existence of an agreed number of jobs for an agreed duration, and that breach of the contract would result in a massive penalty. I also know that this of late has had an effect in preventing a greater number of jobs from heading elsewhere – yet. It’s also worth bearing in mind that total labour costs in Ireland are still very low in EU terms, and that non-pay costs are the principal factor in undermining competitiveness.

So there is a role for the state here, but in terms of stop-gap measures. There should really be a drive, I think, toward ending direct dependence on multinationals rather than making life easier for them. That underlines the importance of points 9 and 10 of Michael’s plan, which I should take a look at another day.

1 Response to “A few notes on ILR Towards a New Economic Plan”

  1. 1 Thriftcriminal December 1, 2008 at 2:54 pm

    Yep, I’ve seen the pay thing in action, there is a report generated by the mutinationals, and a couple of others, each year. Essentially their HR departments pool their knowledge and this allows them to insist that they are paying “at or above average” and effectively reduce churn.

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November 2008

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