Opinion: can social partnership agreements be part of the deficit solution?

My native Ireland enjoyed a period of unprecedented economic growth in the late ‘90s and early nougties, and while many of the reasons are similar to the reasons Britain enjoyed periodic growth in the same period, one factor in the growth which was unique to Ireland were the use of Social Partnership agreements.

These agreements were principally negotiated between the private sector employers, the government in a dual role as both government and large employer, the unions and social groups and organisations.

Agreements such as these typically last about four years, and the benefit to the economy is that there is a low rate of strikes, while employers and the government are aware years in advance of what their costs will be.

The usual pattern is that the private sector employers secure agreements from the Unions about productivity, in exchange for giving agreement to wage rises pegged against inflation, while the government and the employer agree about the taxes which the employer will face in the lifetime of the agreement.

Social enterprises such as charities, are informed in general terms, of the level of funding they will receive in the coming years, and of anything within the tax system which is likely to affect them.

It is interesting to note that this system thrived during the boom, and still exists amid Ireland’s economic decline, and that while the Unions are affiliated to the Irish Labour party, which is often the minor party in a coalition but has never provided a head of government, the agreements are concluded irrespective of which party provides the Taoiseach (Prime Minister). These agreements began in the recession hit ‘80s and are still running today.

As the Coalition pursue many policies, such as lowering corporation tax rates, which are supply side economics and as a result require high levels of confidence among consumers and businesses in order to work.

But every time a Union ‘baron’ speaks, and the threats of strikes fills the airwaves, this confidence is dented, and the supply side policies framing the coalition economic strategy are less likely to be effective.

A social partnership agreement between the various stakeholders in the economy would provide a measure of certainty for the government as it develops its fiscal policies, workers uncertain about whether to spend, save or invest, and business leaders cautious in the face of the current economic growth about investing in an economy which could be hit by a wave of strikes.

One of the things which emerged from the televised Prime Ministerial debates was that every time Nick Clegg mentioned politicians ‘working together’ the audience approved, and such an agreement would surely meet the criteria for the term ‘new politics’.

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2 Comments

  • Austria has been using this system for decades – and yes, strikes are very rare there – and even were rare in the difficult 80s. However, the social partnership system there has become so deeply embedded in the establishment, that it also represents an unelected powerbase which is used to make pretty momentous decisions without much control.

    The Irish system, with its time limited agreements, might be a better solution. I suppose that it’s a system worth looking into, but it would have to be set up and negotiated with care.

  • david thorpe 1st Oct '10 - 11:42pm

    britain alreday has the unelected powerbases Im afraid.
    at least social partnership agreements try to harness that power for the public good

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