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The hammer of the (union) gods
Read more about: Corruption, Economy, Europe, Social Policy, Unemployment 
The Irish Times has an interesting two part series on the predicament of the Irish unions. Today’s installment provides a good insight into the minds of the union leadership and in so doing illustrates the challenge of relevance. David Begg and Jack O’Connor now say that after 20 years of Social Partnership™, all they ever really wanted was the “Nordic Model” which is clearly the key buzz phrase sitting in the ICTU talking points. Now leave aside that it’s a tad odd to decide after such a long time with a seat at the table to claim that your preferred direction is different and let’s focus on specifics. What is the Nordic model? A recent book by Nordic economists offers a definition –
a comprehensive welfare state with an emphasis on transfers to households and publicly provided social services financed by taxes, which are high notably for wage income and consumption;
a lot of public and/or private spending on investment in human capital, including child care and education as well as research and development (R&D); and
a set of labour market institutions that include strong labour unions and employer associations, significant elements of wage coordination, relatively generous unemployment benefits and a prominent role for active labour market policies.
Which indeed sounds like the kind of thing that unions might be in favour of. But can we get there from here? The difficulty of shifting to a higher tax model is obvious, notwithstanding that Ireland has significant scope for higher taxes. But the whole tax and welfare system would also have to reconfigured to encourage work and the Irish childcare model is very far from the direct role taken by the state in Scandinavian countries.
Indeed, with its focus on reducing unemployment and drawing more people into the labour force (which is critical to the sustainability of its benefits system), the Nordic model works very differently from Social Partnership™, which in its late Tiger days had become a ritual whereby Bertie would descend at the tail end of “tight” negotiations with apparent goodies for everyone currently employed.
There are two other issues worth mentioning. The same book says that it’s necessary to go beyond a list of ingredients and ask: what makes the Nordic model work? –
Furthermore, the importance of a high level of trust and absence of corruption must not be underrated – these phenomena help maintain the public backing and therefore the viability of a large public sector.
Hands up who thinks Ireland has the requisite level of trust in government for such a model to be viable?
Second, the Nordic countries have an interesting difference from Ireland in another respect. Put aside Norway, given the oil and gas. From Sweden, Denmark, and Finland, the first two stayed outside the Eurozone which, for better or worse, has given them more policy autonomy at home which may well be part of the sustainability of their social model in their eyes. One hopes that instead of tossing around a silly insinuation that Ireland is headed for a Blueshirt resurgence (“It shouldn’t be forgotten that it was the middle classes who formed the fascist parties in the 1930s as a consequence of dissatisfaction with both markets and democracy”), David Begg is putting some genuine serious thought into a reworked Irish social model and the past choices that may have pre-empted it.
How generous is “relatively generous” in the Nordic model? We already have a Nordic welfare state without the fringe benefits it seems to me.
Secondly, perhaps someone else could comment on the approach to unemployment in this nordic system? Many working Irish people would favour an unemployment system that sees the welfare recipient gainfully busy in public works of some sort.
The high benefits paid here in welfare and the “poverty trap” working people fall into so easily in Ireland create problems already. Implimenting any parts of a new system will first require a complete rebalancing of our system to incentivise productive work, as the analyst suggests.
“requisite level of trust in government” it’s not just trust in government. It is trust in all arms of the state including those who are to deliver the public services so funded. In Ireland we simply do not (and much of this stems from the mismanagement of the 70s and 80s) trust public services to deliver the more limited services that the public has already paid for via their taxes and that goes for public servants themselves.
How many teachers send their kids to the local tech or comp instead of the CBS, Pres, other religious or independently run schools?
How many doctors, nurses, HSE administrators have VHI/Quinn/Aviva cover?
How many Dublin Bus/Irish Rail/Bus Eireann employees rely on public transport 100% to get them to work and about the rest of the week?
I’m not having a go at them for doing so, I’m having a go at the notion that it is solely private sector tax payers who undermine the public sector. The main reason that the unions in the 90s asked for income tax cuts and not increased spending the public sector with targets for new and enhanced services, like childcare, like GP medical cover for all children, is that they knew the money would simply disappear as it has in the health service without the commensurate increase in services.
“publicly provided social services financed by taxes, which are high notably for wage income and consumption”. If this is what the unions want now it is certainly something new, For years a plank of unions negotiations has been low taxes and there has not been a whimper from the unions about their members joining “insurers” who want to cash in on the provision of health, pensions etc.
It seems to me the situation is now irretrievable. The latest news is that government wants to abandon the statutory minimum wage. Will 2013 be a repeat of 1913?
Now leave aside that it’s a tad odd to decide after such a long time with a seat at the table to claim that your preferred direction is different and let’s focus on specifics.
Not all. There were those (Mick O’Reilly, Mr. Ogle) who didn’t subscribe to the FF view of the world.
[...] is that they knew the money would simply disappear as it has in the health service without the commensurate increase in services.
Really? I’m fascinated by the FG powers of mind-reading being demonstrated here.
EWI, I hate to break it to you but I’m not the personification or embodiment of FG. And the line is my opinion of what their reason was. Just as you’ve said “Mick O’Reilly, Mr. Ogle don’t subscribe to the FF view of the world.” how do you know? are you in the polling booth with them?
EWI, I hate to break it to you but I’m not the personification or embodiment of FG. And the line is my opinion of what their reason was. Just as you’ve said “Mick O’Reilly, Mr. Ogle don’t subscribe to the FF view of the world.” how do you know? are you in the polling booth with them?
You don’t recall the suspension of Mick O’Reilly for accepting ILDA into the ATGWU, and further don’t recall how it was widely reported that Ahern had in fact got Blair to push Morris to suspend O’Reilly?
It was certainly covered widely at the time, not least in the Phoenix and (iirc) the SBP as well.
It was reported was it? It must be true so. And the fact that Bertie might have had someone pushed doesn’t mean that they couldn’t bring themselves to mark a FF candidate’s box on a ballot. I’m not saying it’s likely but we started with you asserting that I was engaged in mind reading for saying that union leaders went for tax cuts rather than services because they believed it more likely that they would see the former rather than the latter. They went for tax cuts (that was widely reported too) and they didn’t go for services in the same way.
I think Begg and O’Connor are making another mistake by hyping up “Nordic Model” as what they want. It invites the government to cherry-pick the bits that fit their agenda (e.g. active labour market policies = welfare cuts) and ignore the awkward parts (e.g. childcare) but with Lenihan or Hanafin claiming that they are following the Scandinavian example. This suggests that notwithstanding the pressures over the years from ATGWU/Unite, the ICTU leadership still hasn’t done any rethink of what partnership actually achieved.
In my view social partnership brought the Trade Union movement right into the middle of Ireland’s elite ruling hegemony. Their selfish bargaining for excessive pay rises even in the face of impending recession from 07 onwards were the actions of just another vested interest group.
The Trade Union movement’s moral authority is by now fully eroded because of their refusal to acknowledge that bench marking should work backwards as well as forwards. Their pretence of a wider social mandate is exposed by adherence to bargaining stances that will cost more jobs.
OConnor and Beggs have fallen back on old left-right rallying cries to justify themselves over the last two years. They conveniently choose to ignore that the old employer-worker and unions vs business lines have blurred.
Under the model of Irelands small open free market model of the last few years we have had the thriving of a small business class and self empoloyed person who are now worse off than the average union member and have no security or benefits to show for it. These are people with good turnovers but modest real incomes, the majority of actual SMEs I would say, who pay for everything; water, rates, VAT, health insurance, doctor, dentist, childcare, you name it- they pay for the lot.
AND the socialist argument that ” they benefitted from the boom and we didnt” is nonsense because these same business people had to cope with soaring wage costs and an escalation of every other cost so that now when revenues have collapsed they probably have no profit cushion to tide them over.
ISME and the SFA are shouting about this but unlike the trade unions the SME group never had a seat at the top table.
I agree with Daniel’s views on the lack of trust in public services. I cant help feeling trade unions are to blame for a lot of the waste we blame the public sector for.
I would be cautious about letting those guys have virtually any say in the reshaping of a socio-economic model.
@Des,
Most of the Nordic countries pay a form of unemloyment benefit, based on earnings over previous years, when a person loses their job; as I understand it. The UB payment ceases after a defined period after which there is an entitlement to claim unemployment assistance for an indefinite period, which is means tested. Also, unemployment benefits are taxed in one or more of the Nordic States. There are some who would argue that the ‘Nordic Model’ doesn’t really exist anymore, not in the form in which it existed in the 1950s and ’60s, when benefits were relatively much higher than they are now. The 1990s banking crisis in Sweden and Finland and the recession that accompanied those events resulted in various cuts to benefits’ payments and they appear to have been whittled down even further since.
All of which is by the way, since the real point is that if you want to have high quality public services, then you have to be prepared to pay for them through high levels of personal taxation. Moreover, your high expenditure public services model needs to be integrated with a highly productive market sector for the system to work to the benefit of all. Then there’s the issue of political culture, in which some degree of consensus is fashioned about the overall direction that society should take. That doesn’t mean there’s no tension between the general public and the body politic – certainly in the mid to late nineties there was plenty of it in Sweden.
Neither of those conditions apply here: we don’t like high taxes and we’re not prepared to pay high taxes to have high quality public services. Even the latest opinion polls reflect that! I think it’s fair to say that we also have a uniquely adversarial political culture, which is also reflected in media representation and an almost weird obsession with personalising every issue, whether it’s immediate or long term in the form of resolution that’s required.
P might have added a further point to his analysis. The TU leadership are reaching for the shelf for the next available model now that the one in which they were active participants for the best part of twenty years has failed them. We had our ‘Irish Model’ of social partnership, which degenerated into a public service pay round and benefits system that was ultimately unsustainable. When the crunch came they just weren’t able to hack it and deal with the fallout. Waxing lyrical about a ‘Nordic Model’ or a ‘Utopian Model’ or any other kind of model just doesn’t cut it anymore.
Wait a second, that’s a remarkably partial reading Veronica of the Irish model of social partnership. Firstly whatever the faults or virtues of the unions the other side of partnership was the emphasis on a low tax economy, this at the behest of IBEC, the PDs and FF. This was far from a one way street. It’s rather easy to say that this degenerated into public service pay rounds and benefits systems that were ultimately unsustainable, but as economic analysts such as Michael Taft has noted these came after the bonfire of tax streams conducted by the FF/PD coalitions from 97 onwards. And, a parallel process of increasing tax reliefs on the higher rate, not just in pensions, but in health, and a raft of other areas.
I’d suspect – and I’m not a public sector worker btw – that had that first element of the process not occurred the sustainability of benefits (I”m presuming that you mean welfare etc) and even pay rounds for the public sector might appear rather different.
As to whether ‘we’ don’t like high taxes, well, I’m in my mid forties and I am rather dubious about that proposition given that the tax rate for much of my working life was quite a bit higher than it is today and that in the main public sentiment across that time was clearly pitched and indeed in SBP polls from late last year higher taxation was still considered a viable and indeed preferable option. What I think might be a more accurate statement would be that sections of the media and the political classes don’t like high taxes, and the reality is that they are frankly far far more culpable for the situation we now face than the unions.
I don’t buy this “we signed up for the tax cuts, but we never really felt comfortable with them” line that’s trotted out now with the benefit of hind-facing 20/20 vision.
The reality is that the social partnership agreements were suffused from the get-go with the notion of trading off tax cuts for wage moderation. Over time the tax cuts went deeper and moderation became less moderate … but if you go back to the very genesis of the process and read the retro-typed script of the original Programme for National Recovery, you’ll see that tax cuts were central to the whole project.
There’s a whole lot of revisionism going on at the moment within the union movement, a distancing from any culpability for the policy mistakes of the noughties. Part of this agenda is a retrospective downplaying of the influence the union participants had on policy formulation. Lots of access but little influence, I believe is the line being spun by David Begg. One wonders why he took up that Central Bank directorship if so little influence was to be had? Maybe they just served nice biscuits at board meetings and that was enough to keep him showing up … for the last 15 years. Really, really nice biccies.
Seriously, its simply not credible that union side stayed in the process for more than two decades if (a) they didn’t feel they had any influence and (b) they fundamentally disagreed with one of the central tenets of the process.
Worldbystorm and Proposition Joe:
You are indeed correct. The unions went along with the notion of low taxes. They even went along with it when the obvious result was the back-dooe privatisation of public service such as health and pension with the reliance for the provision of these service being put, not on the government, but on private financial institutions who obviously see their chance to rip off the public sector now that they have milked the private sector dry.