Read: Minimum Wage, Part One

From: Problems: Articles

Date: January, 2012

By: Eamon Dyas

Minimum Wage, Part One

The Minimum Wage And The Working Class. Part One. Ireland Under The British Minimum Wage.
[New Series, Number Nine & Ten (1st & 2nd Quarters, 2012)]
Introduction

The document entitled “Ireland Memorandum of Understanding on Specific Economic Policy Conditionality” is one of the seminal documents relating to the bailout agreement between the Irish Government and the Troika. It is dated 8 December 2010 and identifies the areas of the Irish economy targeted for reform by the Irish Government as well as providing the timetable for such reforms. As such the document provides one of the means by which progress is measured by the Troika each quarter to ensure that the Irish Government is keeping to its side of the agreement for the bailout. Item 3 of the Memorandum is called “Structural Reform” and is listed as one of the “Actions for the first review (actions to be completed by the end of Q1-2011)”. Because it touches upon one of the few areas in Irish industrial relations in which the Trade Union movement continues to have a direct influence what it says provides an important insight into the political and economic thinking behind the Irish bailout and the direction which a fulfilment of those bailout terms will take the movement in Ireland. Unsurprisingly, what the IMF, the EU, the ECB and the Irish Government have come up with in terms of this agreement displays a consistent viewpoint in which the Trade Union movement continues to be marginalised. This is an unavoidable implication of Item 3 where it states:

“To facilitate adjustment in the labour market
The government will introduce legislation to reform the minimum wage in such a way as to foster job creation notably for categories at higher risk of unemployment and prevent distortions of wage conditions across sectors associated with the presence of sectoral minimum wages in addition to the national minimum wage. Measures will be as follows:
Reduce by €1.00 per hour the nominal level of the current national minimum wage.
Enlarge the scope of the “inability to pay clause” permitting firms to invoke this clause more than once;
These measures should come into effect by May 2011.
An independent review of the Framework REA and ERO arrangements will be initiated by the end of Q1 2011. Terms of Reference and follow up actions will be agreed with European Commission Services.”

We have here the “Memorandum of Understanding” addressing the twin expressions of the minimum wage insofar as that issue has historically manifested itself in Ireland. It counterposes the concept of a centrally established minimum wage with what it calls “the presence of sectoral minimum wages in addition to the national minimum wage” and sees the former as a distorting influence upon the latter.

The concept of the minimum wage is increasingly viewed in the EU according to its British definition – in other words, as a National Minimum Wage. Under the terms by which the British National Minimum Wage mechanism operates governments have the sole responsibility for setting a wage rate which is applied nationally and that rate is designed to apply to all sectors of the economy irrespective of the variations in labour costs in any particular sector or the variation in the cost of living in different regions. Insofar as the British Trade Union movement has any function in the thing it is restricted to that of lobbying on the rate at which the minimum wage should be set and has long accepted and advanced the case that a universally set and applied National Minimum Wage is the best way of protecting vulnerable workers, and further, that the government should be the ultimate and sole arbiter of that National Minimum Wage.

If recent legal and political developments are anything to go by this is also becoming the case with regards to the Irish situation. The legal thinking on the subject was revealed in the High Court judgment of 7 July 2011 which Mr. Justice Feeney delivered in the case against the “Catering Joint Labour Committee, the Labour Court, Ireland and the Attorney General.” The implications of that judgment will be gone into later, but for the moment and for the sake of clarifying the issues concerned we need to concentrate upon the distinction between the national minimum wage and what has been called “sectoral minimum wages” in the Memorandum of Understanding.

The “sectoral minimum wage” is a generic term that describes the different wage rates set by Joint Labour Committees in different sectors of the economy in Ireland and imposed on employers through the issuing by the Labour Court of what are called Employment Regulation Orders (EROs). The fact that the Joint Labour Committees have the power to set such rates independent of direct involvement by the State and that a central role in these Committees is played by the Trade Union movement has made them prime targets for those in the Irish establishment who wished to put an end to them in their current form.

In terms of the mechanism by which it operates, the National Minimum Wage (NMW), on the other hand, has no official place for the trade union movement. The Government, acting to its own agenda, arbitrarily sets the rate for the National Minimum Wage. The Secretary of State in Britain is obliged to consult the Low Pay Commission which currently includes three trade union individuals among its nine members but, as the LPC official website is at pains to point out, all its members serve in their individual capacity and “not as representatives of the organisations for which they work.” And, despite having to consult the Low Pay Commission, the Secretary of State is under no obligation to implement its recommendations. The same arbitrary powers of the Government were seen in the Irish situation in 2011 when, without any real consultation, it decided to reduce the National Minimum Wage by €1.00 per hour. Although the public outcry subsequently obliged it to reverse that decision the incident revealed the exclusive relationship between the Irish Government and the National Minimum Wage.

In both the British and Irish situation the Trade Union movement’s role in the National Minimum Wage is restricted to that of a lobbyist and there is a world of difference between a Trade Union movement that has been reduced to playing such a role and one in which, in the Irish situation, it continues to be engaged, through the Joint Labour Committees, in the central mechanism for setting “sectoral minimum wages” in whole areas of the economy.

The problem for those wishing to abolish this mechanism, however, was that the Government stood in relationship to that mechanism in a different way to how it stood in its relationship with the NMW. Changing the latter involved a simple adjustment in figures but changing the former required an abandonment of principle. Consequently, as befits the need to challenge a wage setting mechanism that has for over sixty years honeycombed whole areas of the economy in terms of its impact on wages and labour-costs the Government could not attack it head-on. Unlike the NMW, this was not something that could be undertaken by a simple matter of Government decree. The required changes in the ERO/sectoral minimum wage mechanism would require a change in legislation and public perceptions had to be moulded in the direction of any new legislation.

This then is the context which produced the “fortuitous” High Court ruling in July 2011. Coming as it did just over six months after the Government had signed its commitment with the Troika to “introduce legislation to reform the minimum wage in such a way as to . . . . prevent distortions of wage conditions across sectors associated with the presence of sectoral minimum wages”, it provided the ideal opportunity for the Government to portray itself as an unwilling agent of such reforms. Through a decision of the High Court the issue of reform had been recast as something which the Government could now “sell” to the public as something to which there was now no alternative. The result of all of this has been the Industrial Relations Act of 2012 which will be investigated in a later article. For the moment it is important to clarify exactly what was involved in the 2011 High Court ruling.

The case was brought by John Grace Fried Chicken Limited, John Grace and the Quick Service Food Alliance. The Quick Service Food Alliance was a convenient organisational device which concealed the involvement of several multi-national global operators like Burger King and Subway from public scrutiny. The case was based upon the position in law of the Joint Labour Committees and their alleged infringement of the rights of property. The legal means by which this case was presented was that the Joint Labour Committees had come to constitute a separate mechanism by which statute law was made and as such was in breach of the Irish Constitution, which preserved such a role for the Irish Parliament. The following is the formal charge brought against the Joint Labour Committees:

“The three plaintiffs in these proceedings seek declarations that certain provisions of the Industrial Relations Act 1946 (the 1946 Act), and the Industrial Relations Act 1990 (the 1990 Act), are invalid having regard to the provisions of the Constitution. The plaintiffs also seek a declaration that the Employment Regulation Order made by the second named defendant on the 12th May, 2008 (S.I. 142 of 2008), fixing the statutory minimum remuneration of workers outside the County Borough of Dublin and Borough of Dun Laoghaire, is unreasonable and constitutes an unlawful and disproportionate interference with the property rights of the first and second named plaintiffs as guaranteed by the Constitution and is invalid and they seek a consequential order of certiorari quashing that Employment Regulation Order. The plaintiffs also seek a declaration pursuant to s. 5 of the European Convention on Human Rights Act 2003, that the provisions of certain sections of the Industrial Relations Act 1946, and a section of the 1946 Act, are incompatible with the State’s obligations under the European Convention on Human Rights and, in particular, are in breach of Article 6 and Article 1 of the First Protocol thereof.”

The High Court was asked by the Plaintiffs to make a judgment (or “relief”) on two separate though related complaints:

“In these proceedings, the plaintiffs seek as a first relief a declaration that the provisions of ss. 42, 43 and 45 of the 1946 Act and s. 48 of the 1990 Act are invalid, having regard to the provisions of the Constitution. A second relief that the Court will address is the claim by the plaintiffs that the ERO is unreasonable and constitutes an unlawful or disproportionate interference with the property rights of the first and second named plaintiffs. As set out later in this judgment, the Court is satisfied that the plaintiffs are entitled to the declaration sought that the provisions of ss. 42, 43 and 45 of the Industrial Relations Act 1946 and s. 48 of the Industrial Relations Act 1990 are invalid having regard to the provisions of Article 15.2.1 of the Constitution of Ireland and also that the plaintiffs are entitled to the declaration sought that the ERO is unreasonable and unlawful and constitutes a disproportionate interference with the first and second named plaintiffs’ property rights. It follows that the declaration sought pursuant to the European Convention on Human Rights Act 2003 does not arise at this time.” (Para 5, Mr. Justice Feeney’s High Court ruling).

As is well known by now, the judgment of the High Court made by Mr. Justice Feeney on 7 July 2011 found in favour of the Plaintiffs. Part of the judgment was taken up with establishing that the Joint Labour Committees did, in the specific case of the Employment Regulation Order (ERO) made by the Catering Joint Labour Committee on 12 May 2008 (which set the minimum wage rate in that industry) constitute an infringement of the Plaintiffs’ property rights. The bulk of the legal reasoning however, revolved around the more substantive issue of the nature of the Joint Labour Committees and their powers to issue, via the Labour Court, Employment Regulation Orders setting out minimum wage rates and how this was in fact an infringement of the Irish Constitution. Without going into too much detail at this stage, that reasoning was based on the lack of identifiable principles and policies informing the manner in which the terms of an ERO is compiled and defined. It is this legal argument which goes to the heart of the matter and which threatened the basis on which the Joint Labour Committees were meant to operate. In response to the arguments put by counsel for the Defence representing the JLCs and the Labour Court, Mr. Justice Feeney had this to say:

“Where the consequences are an ERO which is to place an obligation on an employer to apply particular wage rates and conditions of employment which can be enforced by criminal sanction, those rates and conditions must be determined and based upon principles and policies laid down by the Oireachtas and not as determined by a delegated body acting in the absence of stated principles and policies.” (Para 34. Mr. Justice Feeney’s judgment, 7 July 2011).

The argument being that any body delegated by the Oireachtas to make judgments and possess the power to impose legally enforceable judgments must base any such imposition, regulation, or order on identifiable principles and policies laid down by the Oireachtas. The fact that the area in which the Joint Labour Committees were designed to operate, i.e. industrial relations, inevitably involved a more open-ended atmosphere to perform their delegated functions held no weight in the thinking of Mr. Justice Feeney. Employment Regulation Orders issued by the Joint Labour Committees are the result of agreements between representatives of the employers and Trade Unions in the sector in which they are meant to apply. In the process of reaching such agreements a form of collective bargaining continues to be performed within the JLCs. In other words, the horse-trading principles normally associated with collective bargaining between individual employers and Trade Unions do not cease but assume a new form within a joint Committee representing the industry as a whole.

What Mr. Justice Feeney demanded in his judgment was that the outcome of the Joint Labour Committees in terms of Employment Regulation Orders be based not upon the open-ended principles of collective bargaining procedures but instead upon principles and policies that are more tangible and identifiable in advance. But neither, it seems, is it enough that such outcomes from the JLCs be based on tangible and identifiable statistical tabulations or formulas. In modern industrial negotiations such things are regularly used by both sides but, in the true spirit of collective bargaining, they are used in an arbitrary fashion with one side producing or interpreting the statistics, tabulations, formulas and projections that best serves their respective purpose and arguments. Such was the case with the ERO outcomes from the Joint Labour Committees. But to be constitutional according to Mr. Justice Feeney’s lights this was not enough. Mr. Justice Feeney was not so much interested in the question of method as much as process and it was the process that ensured the worth of the JLCs to the Trade Union movement. Instead, what Mr. Justice Feeney was demanding was that the Employment Regulation Orders be constructed according to an agreed set of principles and practices that emanated from outside the dynamic process of the Joint Labour Committees and the Labour Court. His thinking is revealed in a clear light in the following part of his judgment:

“Since that judgment [Burke v. Minister for Labour – an earlier judgment in the Supreme Court in which Mr Justice Seamus Henchy made some observations outside the terms of the case before him on the constitutionality of the Joint Labour Committees powers to set wage rates – ED] which was given in December 1978, the 1946 Act has been amended and a universal statutory minimum wage has been enacted by the National Minimum Wage Act 2000. The [Industrial Relations] 1990 Act did not address the concerns obvious from the judgment of Henchy J. in Burke v. Minister for Labour. The enactment of the National Minimum Wage Act 2000 and the identification of principles and policies which were to inform the Minister in making an order for a national minimum hourly rate of pay as set down in s. 11 of that Act did not result in any amendment to the 1946 Act and the principles and policies contained in the 2000 Act were not extended to the 1946 Act.”

And here we have it. The Joint Labour Committees, in the issuing of Employment Regulation Orders, could only be valid if they were to be tied to a process by which the National Minimum Wage was compiled and, of course, the National Minimum Wage was valid because it was informed by various “principles and policies” which found their credibility outside the realms of the horse-trading cut and thrust of a collective bargaining process. This is no mere technical issue but something that goes to the very heart of how the original Joint Labour Committees and the Labour Court were meant to function. But as that original function was framed within the Christian democratic ethos of Catholic Ireland it no longer serves the purpose of the modern free-thinking and Free Trade principles of the Irish capitalist class and as such it has to be adapted to these new requirements.

A written constitution relies for its interpretation upon the culture within which it is viewed and the law becomes the instrument by which changes in that culture become socially effective by altering the interpretation of that constitution. In the case of the Irish situation the Catholic culture traditionally ensured that labour would have identifiable rights as defined by Catholic social thinking but with the increasing dilution of Catholicism within the society those rights became vulnerable over the past 30 years. In recent years with traditional Catholicism being replaced by no coherent alternative the vacuum has increasingly been filled by a particularly virulent form of secularism based on consumerism and the rights of property. In such circumstances the rights afforded to labour through Catholic social thinking have become a definite target for “progressive” thinking. This tendency has been given added impetus in the current financial crisis with its emphasis on monetary and fiscal probity finding expression in terms that highlight areas of the labour market in need of reform.

Fianna Fail, in entering its commitment to the Troika in the “Memorandum of Understanding” of December 2010 to “review the Framework of the REA and ERO arrangements” in the context of “sectoral minimum wages” appears to have had some idea of the direction it wished to take such reforms. That direction was indicated by the fact that in the final days of its Government, on 8 February 2011, the Minister for Enterprise, Trade and Innovation, Mary Hanafin, commissioned an Independent Review of Employment Regulations Orders and Registered Employment Agreement Wage Setting Mechanisms. What was unusual was that it appointed Kevin Duffy, the then Chairman of the Labour Court, as one of the co-authors of the review (the other author being the UCD economist Frank Walsh). The appointment of the then Chairman of the Labour Court was commented upon at the time of evidence of a lack of seriousness on behalf of the Government to deal seriously with the issue of reform but it is more likely that Fianna Fail was serious about reform but wished to ensure that such reform went in the direction it wanted. Whatever the case, by the time the Duffy-Walsh Report was presented to the Government in April 2011, Fianna Fail was no longer in power and the route of reform had moved further away from that recommended in the report and assumed a character more in keeping with Mr. Justice Feeney’s subsequent High Court ruling of July 2011.

The Coalition Government, in response to the High Court finding, promised to bring in legislation which took account of the 2011 decision of the High Court and that legislation was duly enacted on 24 July 2012 as the Industrial Relations (Amendment) Act. The impact of that legislation on the freedom and independence of the Joint Labour Committees will be explored in a later article, but for the moment we can glean a clearer insight into the significance of what is taking place by going back to the beginning of the Irish working class’s experience of the minimum wage, to the point where Mr. Justice Feeney placed it in his introduction to the 2011 High Court judgment:

“The two Acts in respect of which a declaration is sought by the plaintiffs in this case are the 1946 Act and the 1990 Act. That legislation originates from earlier Acts, namely, the Trade Board Act 1909 and the Trade Board Act 1918.” (Mr. Justice Feeney in para 2 of the judgment).

Jurists have a tendency to believe in the absolute nature of law. Mr. Justice Feeney in his judgment reveals just such a tendency when he claims that the case he was judging in 2011 under the terms of the written 1937 Irish Constitution, had its genesis in legislation instigated in 1909 by a State whose existence was and remains reliant on the fact that it does not possess a written constitution. Law in this sense is viewed as something which transcends not only the diametrical opposites in the type of State which gives it meaning but also the cultural attitudes which underpin its interpretation - from those of Protestant England in the early 20th century to Catholic Ireland in the mid-century and forward to an Ireland in the process of losing any sense of itself in the early 21st century, to say nothing of a political legitimacy derived from the very limited franchise of early 20th century Britain to the full franchise operating in the Republic in 1946. But then, maybe that is something that any workable definition of law requires. It would be quite debilitating if jurists went about their business by constantly making reference to the relative nature of the code they are paid to uphold and to interpret according to the requirements of the society in which they function. That would not do at all.

But what Mr. Justice Feeney says about the 1909 Trade Board Act does have some legitimacy for the Irish working class, particularly in the context of its relationship with the concept of the minimum wage. The social and political experience that the Irish working class is having to contend with at the present time does have a bearing on what it was experiencing under a different jurisdiction in 1907 and in order to fully understand what that is it is necessary to look back at the class and the idea of the minimum wage at that time. The lesson to be learned is that it is not Law that transcends jurisdictions and cultures but rather the experience of those workers who have been compelled to live under this and that interpretation of it.

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Minimum Wage, Part One

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Minimum Wage, Part One

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