“There is widespread agreement that an industrial relations system of the traditional
British type, which combines low levels of co-ordination of both employers and unions with a high coverage of the workforce by collective bargaining agreements, leads to high levels of equilibrium unemployment. These effects are exacerbated by high labour taxes and generous unemployment benefits that continue indefinitely with little pressure exerted to find or accept work. The response of the Thatcher administration to these problems was to weaken trade union power, reduce the coverage of collective bargaining, lower the replacement ratio (i.e. the ratio of unemployment benefit to earnings) and generally shift the system of pay determination towards the American model.
The Irish reform programme went in the opposite “neo-corporatist” direction, in favour of the social-partnership approach. The first such deal was agreed in 1987 and the most recent, designed to last into the new century, was signed a decade later. The partnership agreements purchased wage moderation via the promise of cuts in income tax, ensured that social welfare payments remained immune from public expenditure cuts and generally supported the replacement ratio.”