Is abolition of the JLCs imminent?
Fionnuala Carolan speaks to Torlach Denihan, director of Retail Ireland, about the history of the JLCs and why he believes there is no place for them in Ireland today
Print20 May 2011
With an 8.3% decline in sales from 2008 to 2010 across the retail sector, there is no denying that the past few years have been harsh times for all. While sales have plummeted, expenses have remained steadfast and have even been rising in some cases.
The three major issues facing retailers are rents, local authority rates and wages. Rents rose in line with property prices over the past ten years and while property prices have fallen, the price of rent has not mirrored this fall. The cost of local authority rates are also a heavy burden on business people who often wonder why they are solely responsible for funding libraries, water and the upkeep of roads while householders enjoy these and other such privileges for free.
And then there are the highly inflated wages that employers are obliged to pay staff in the sector due to the Joint Labour Committee pay rates. These affect a number of sectors such as hospitality, cleaning, hairdressing and of course, retail.
The problem is that the Joint Labour Committees set the minimum terms and conditions of employment above and beyond the national minimum wage, with added premiums for weekend and overtime work.
Antiquated wage rules
Retail Ireland director Torlach Denihan believes that if the government is serious about getting people back to work it must abolish these antiquated wage rules and allow staff in the retail sector to be subject to the same conditions as all other workers in the country.
“The law as it stands is putting viable businesses in jeopardy and is costing the sector approximately €30 million annually,” Denihan says. “Getting wage levels back into line is a necessary step towards restoring our economic fortunes and getting people back to work.”
There is currently a review of the JLC pay rates being conducted by the EU and the IMF with an outcome due soon. The main problem with the rates is that they are so out of sync with the national minimum wage. If the next proposed increase comes in, the basic rate for retail staff will be 26% higher than the current national minimum wage (€7.65 euro).
Denihan says that apart from putting strain on the retailers, it is affecting jobs and the price of living.
“I think there’s a wider economic consequence as well in that it’s artificically inflating the cost base of every grocer in the country and that is putting an upward pressure on grocery prices. People come back from holidaying in Spain and are mouthing off about how cheap it is but they forget that the wage levels over there are much lower.”
Torlach Denihan, director of Retail Ireland
Torlach Denihan, director of Retail Ireland
EU and IMF get involved
Retail Ireland was involved in meetings with the EU and the IMF in November and April and it was pointed out that Ireland needs to get its cost base and especially its labour costs in line with its competitors for the economy to get moving again. Denihan says that the fact that the IMF has hightlighted the JLCs and asked that they be reviewed means this is an area of perceived difficulty.
For a country that is so deeply in debt it makes little sense to have the second highest minimum wage in Europe.
“We have 444,000 people on the live register and we believe JLCs are the wrong approach,” says Denihan. “If the government doesn’t abolish them it will send out a very negative message internationally about how Ireland is dealing with the serious economic challenges it faces.
“These wage rates are putting viable businesses in danger and they are a major obstacle to job creation. We believe that abolition is what is required.”
JLCs predate WW2
Denihan explains that the JLC legislation in its current format was established just after the second world war but the forerunner predates the first world war. They were brought in because there were certain sectors that were seen as vulnerable. There was also a view that they weren’t ready to implement a minimum wage for everyone so the government of the time put in a minimum wage for certain sectors that were traditionally low in pay.
The problem is that when Ireland introduced a national minimum wage it didn’t abolish the JLC system so we now had a sectoral minimum wage that was higher that the national minimum wage.
Minimum wage reinstated
When the last government decided to cut the national minimum wage by one euro it was seen as a sensible approach by the business community. The new Fine Gael government has made the controversial step of reversing this change because they promised to do this in their election manifesto. Denihan doesn’t agree with the move but he says this really isn’t where the problem lies.
“I wouldn’t agree with their [the government’s] move in terms of a national competitive perspective. They would have been better to leave the reduced minimum wage stand. Having said all that, the minimum wage itself, isn’t an enormous issue in retail because not many staff are on it. They are either on the JLC rate or more.
“I think they should do what the British did. When they brought in their minimum wages in 1992, they abolished the equivalent structure to the JLC and they took the view that the national minimum wage conferred protection. We insanely decided to keep all the JLCs and the costs that they impose but they also pitched the rate higher than the national minimum wage.”
The employer representatives on the JLC did resist all of those increases, says Denihan, but they were consistently outvoted by the union side and the chair sided with the unions so they were outvoted.
“We would have a particular concern around that because the employer reps in IBEC briefed the JLC fully on the crisis griping retail. The retail JLC decided to ignore that and plough ahead and increase wages.”
Results of review
The present review of the JLCs is looking at them in terms of relevance, fairness and efficiency and on all these points, Retail Ireland feel they are not suitable.
The review was due to be concluded by the end of the first quarter. It is now up to the government to discuss the conclusions with the EU Commission and the IMF and then a decision will be made. The problem, Denihan believes is that it is going to be a very unpopular decision for any government to be seen to reduce wages at this time.
“No political party was willing to put their name on the line for signing up to abolition. There’s a very real challenge for a politician to turn to any group of people and say, you guys are being paid too much.”
Most earn more than JLCs
While the JLC rates are much higher than the national minimum wage, most workers in the grocery sector earn even more than the JLC rate because of Sunday premiums and because they go up the scale due to experience.
“We don’t believe that the workers in retail are vulnerable and need any special protection over and above the national minimum wage. Probably the main vulnerablilty is for the company to remain solvent and that it’s in a position to keep employing them.
“Had the JLCs not been in existence there would be more people employed today in retail grocery than is the case. The last thing an employer wants to do is make people redundant. If people were given more flexibility in the system, in some cases staff that had been let go, would still have their jobs.”
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