We appreciate the opportunity to discuss employment and employer rights, low pay, the minimum wage and union recognition. Clearly, these issues are germane to the regulation of our labour market as a key component of competitiveness. It is important that a system of employment rights is fair and equitable but, equally, it must operate in a manner that underpins employment rather than hinders it. I do not need to overplay the economic context in which we find ourselves but in the employment context we are all but too familiar with the burgeoning numbers on the live register, with a 76% increase in the past 12 months. Within that, we will probably see a total of 140,000 job losses in the construction sector before the adjustment period is over and we also estimate 25,000 additional jobs will be lost in the retail sector as a result of the economic downturn. We do not expect employment growth before 2012 and we are experiencing a fall in the labour force as a result of renewed emigration and a lower participation rate. At best, that might contain the unemployment rate at under 14%. By any stretch of imagination, this is a serious unemployment trajectory. Within the economy, the hospitality, retail and traditional manufacturing sectors are being severely hit, in particular. For example, hotels are a key component of the hospitality sector and their operating costs account for at least 41% of revenue. They are fighting for survival in the midst of a collapse in the tourism market.
I refer to the minimum wage and the serious issue of joint labour committees, which is currently the subject of legislative reform. Ireland has the second highest minimum wage in Europe after Luxembourg. The issue of job security must be at the heart of the debate about the minimum wage. It was last increased by 4.2% to €8.65 per hour in July 2007 without an increase in output. It applies, according to the ESRI statistics, to 5.2% of the workforce. The minimum wage was introduced at a time of exceptional prosperity, which has waned, and as a result of the devaluation of sterling over the past two years, the national minimum wage in the UK is 26% lower than in Ireland. There is a major issue in that an unchanged minimum wage acts against the downward direction of all wages, costs and prices necessary to restore competitiveness and if we do not tackle the issue of wage levels in the economy, this will be a major impediment to regaining our competitive edge. The Central Bank estimates wages will fall by 4% in 2009 and by 3% in 2010 while we estimate more than 60% of companies have reduced their pay bill over the past 12 months by 21%.
A key issue that arises in the operation of the minimum wage is the absence of genuine flexibility. In particular, section 41 of the National Minimum Wage Act 2000 was designed to provide flexibility to employers in financial difficulty but it is not fit for purpose. No applications have been forthcoming because of the requirements of the section, which are cumbersome and need the consent of the majority of employees affected by any proposal by the employer. That must be examined and a new way found to provide the necessary flexibility for employers in genuine difficulty as a result of the current minimum wage rate.
The joint labour committee issue has been hugely controversial particularly in the hospitality and catering sectors. The divergence in statutory wage rates, for example, between the Republic of Ireland and Northern Ireland is striking. Even allowing for the current exchange rate when one compares the rates of pay applicable in hotels and the catering, contract cleaning and security industries, Irish rates are between 42% and 68% higher. That raises fundamental questions about the relevance of the JLC system. In the UK, the system of wage councils was abolished in 1993. We have introduced some procedural changes in recent years but we believe that at a policy level the JLC system should be abolished. We recognise, however, that public policy remains supportive of retaining such a system. If it is to retain employer support, it is equally clear that a significant number of changes need to be made, particularly given the opportunity available on the industrial relations (amendment) Bill, to try to encourage employers to continue to support a JLC system, since that is the public policy position. Equally, we have achieved progress in some sectors and it is important to recognise the welcome changes that have been agreed between ourselves and SIPTU, in particular, in addressing uncompetitive premium rates for Sunday work in the catering and hotel sectors. These changes, along with other reforms, are welcome but are not sufficient. In the JLC system a temporary exemption should be available to an employer who is in genuine difficulty from an employment regulation order. The retrospection period for claims should be brought into line with the payment of wages legislation, this is, a maximum of one year. The role of chairpersons in respect of joint labour committees, which traditionally has been a voting role, should be a non-voting role and all JLCs should be chaired by industrial relations officers of the Labour Relations Commission. The intention is that if one is talking about true agreement, that provides a genuine opportunity for employers and trade unions representing workers to achieve real agreement as distinct from something that would be imposed.
I wish to mention briefly our concerns in respect of the operation of the Employment Law Compliance Bill. We believe that Bill, as presented, is fundamentally flawed. The genesis of the Bill was born out of an agreement between the social partners and Towards 2016 but the Bill, as published, would completely change the nature of our employment law from a voluntary system based on the primacy of local engagement and civil redress, to one based on prosecution, enforcement and regulation. That was not the balance struck in Towards 2016.
The Bill needs to be fundamentally amended to ensure the focus shifts away from enforcement and prosecution on to the principle of local resolution. Many of the criminal offences provided for in the Bill are unnecessary and punitive. The powers it would confer on NERA are oppressive. For example, there is the notion of what we call the star chamber investigation under section 38. The powers afforded to the director of NERA are unprecedented in this jurisdiction. The Bill introduces onerous new obligations on employers that are not required, such as the duty to collect a copy of a passport from every employee and the duty to give every single employee a statement of cessation which would cause litigation in situations in which the employment terminates.
We estimate that 36 sections and Schedules need to be removed and substantially amended. As the committee will be aware, we have already made available a detailed and lengthy submission to the members of the committee for their consideration of the Bill on Committee Stage.
I turn to the issue of union recognition because it has assumed some prominence in public debate in recent months. Let me be clear, there is no scope in Ireland for the creation of any mechanism to compel employers to recognise trade unions for collective bargaining purposes. The introduction of such arrangements or a right to collective bargaining or otherwise to do so in all but name would be a significant disincentive to many of those organisations we have attracted into this country to create employment and invest here. We have heard this directly from many of those same employers.
In regard to the Lisbon treaty it is important to state that there has been some debate about the effects which the relevant provisions of the Charter of Fundamental Rights convey. That appears to arise from consideration of Article 28 of the charter which refers to a "right of collective bargaining and action". That right is extended to both workers and employers and is a two-way process. The article provides for a right to negotiate and conclude collective agreements but in accordance with national laws and practice. We have a well-developed system of national laws and practice for dealing with these issues and provision has already been made in our legal system for the conclusion of collective agreements. We already have in place legislation that provides for means for the registration of employment agreements. We in Ireland must continue to assert our own rights and entitlements on how we regulate for collective bargaining and strike action. Our courts have recognised the corollary of any freedom of association with a freedom not to associate. It is important that balance is reflected on by the Legislature.
My final comment on this area is in respect of the ongoing work between IBEC and congress under the chairmanship of the Department of the Taoiseach in a high level review group on employee representation which emanates from the commitments in Towards 2016 review and transitional agreement. The purpose of that agreement is that the parties consider the steps necessary to enable the employee representation mechanisms, established under previous agreements as provided for under the Industrial Relations (Amendment) Act, to operate as had been intended. That job of work has only recently commenced and will be the subject of detailed consideration by the parties in the coming months. Some of those difficulties arose out of the Supreme Court judgment in the Ryanair case, with which members of the committee will be familiar. We remind everybody concerned that properly invoked and prosecuted, that legislation, along with amended procedures set down by the Labour Court, remains a powerful tool for trade unions to bring about the improvements in terms and conditions of their members where collective bargaining is not a feature of the employment and the voluntary dispute resolution procedures have failed. By agreement over the years in this jurisdiction, we had the legislation to give trade unions the opportunity, where they have members, to have the fairness or otherwise of the terms and conditions of employment of those members attested to and assessed and evaluated according to the criteria set down in the legislation but on the basis that any recommendation from the Labour Court cannot give rise to collective bargaining arrangements. That is something we have freely entered into and agreed. That particular legislation, as a result of how the trade unions have chosen to interpret the effects of the Supreme Court in the Ryanair case, has not been operated effectively since that case. We believe there is an opportunity to agree sensible arrangements to restore the intention of the social partners to ensure those mechanisms operate as intended. That is the job of that high level group that is currently considering those matters. I will conclude and will be happy to deal with questions.
