The Impact of Social Partnership on Ireland's Competitiveness

Abstract

Social partnership has been a central facet of Irish society since 1987. In order to support economic growth, a principal objective of the partnership process has been to achieve moderate increases in wages in exchange for reductions in income tax to boost take home pay. To achieve this outcome, one of the core elements of social partnership is a centralised wage agreement negotiated between the Irish Government, the main employer bodies and Trade Unions. These wage agreements, known as the National Wage Agreements (NWA), have been identified in a number of studies as having played a pivotal role in the remarkable revival that occurred in the Irish economy in the late 1980s, and the considerable growth that took place in the country over the `Celtic Tiger? era. In particular, most of the research indicates that the wage restraint attained under the pay agreements enhanced the country?s competitiveness, through lower labour costs, and this consequently led to both significant employment and economic growth. Real unit labour costs in Ireland have fallen in most years since the social partnership process began in 1987 Over the 1987-2002 period, unit labour costs fell by around 25 per cent in Ireland compared to, approximately, 10 per cent across the EU. Thus, this would seem to suggest that the wage increases under social partnership have been modest enough to boost Ireland?s international competitiveness.