Britain could face a summer of labor unrest due to strikes by railway and postal workers, teachers, aviation staff and nurses. In the US, last year Deere & Co. and Kellogg Co. A wave of industrial action at companies like Apple Inc., Amazon.com Inc. and Starbucks Corp. followed grassroots efforts to organize employees at Representing millions of German manufacturing workers, it is calling for a wage increase of up to 8%, the highest in 13 years.
Although still modest compared to the labor activism of the 1970s, this nascent labor revival may worry central bankers because higher wages could cause consumer prices to rise further. But forcing employees to meet moderate wage demands, as Bank of England Governor Andrew Bailey did in February, would be unfair and unrealistic.
Companies are reluctant to mark up prices to protect their profit margins, which last year hit their highest level since the 1950s. Why should workers – especially those at the bottom of the income scale – make concessions now that they finally have some leverage?
As globalization recedes and the pandemic slows international migration, Brexit throws up a further barrier. Workers are being left out of tiring or mind-numbing jobs like airport baggage handling, which has contributed to the travel chaos we’ve seen.
Barring a deep recession that creates high unemployment and renewed job insecurity, high wage pressures and tight corporate dividends are here to stay. Coping with hyperinflation will inevitably require sacrifices from better-off workers, a more cooperative approach to labor relations, and a more equitable division of capitalism’s profits.
Until recently, the central banks of rich countries had virtually eliminated hyperinflation: unemployment fell, corporate profits and the stock market boomed, and consumer prices were under control. However, our monetary guardians may have overestimated their own talent and underestimated the impact of reduced labor bargaining power.
The decline of manufacturing and outsourcing to low-wage countries, the rise of corporate monopolies, and labor-replacing automation have all made it harder for workers to win higher wages in recent decades. But shrinking union membership, lax worker protections (including an inadequate minimum wage) and shareholder pressure to cut labor costs are probably even more harmful to workers, argue economists Anna Stansbury and Larry Summers. (1)
Today, only about 10% of the US workforce belongs to a union—about half the level of nearly four decades ago. In the private sector, this amount is only 6%. In the UK, union membership fell to 23%, the lowest on record.
After falling sharply since the early 1980s, labor’s share of national income in the US has recently begun to recover. Many British workers, including those in the public sector, experienced an income squeeze in real terms in the years following the 2008 crisis. (3)
And yet Boris Johnson’s Conservative government and the largely right-wing British tabloid media are horrified that Margaret Thatcher’s anti-union legacy is being so brazenly challenged.
Attempts to portray striking workers as Marxist dinosaurs holding the British economy to ransom underestimate the level of public sympathy for those on the picket line. The pandemic revealed how dependent we are on key workers who don’t have the luxury of working at home.
Mick Lynch, the plain-spoken head of the National Union of Rail, Maritime and Transport Workers, has proved a particularly effective foil among hapless ministers and television pundits. His withering putdowns are widely shared on social media, which must be a first for a union boss.
In the US, public approval of trade unions is at its highest since 1965, with former United Auto Workers union leaders recently facing prison sentences for abuses.
US President Joe Biden has been the most pro-union resident of the White House in decades and has used appointments and executive orders to advance a labor-friendly agenda, despite congressional opposition to his Protecting Rights Act.
Of course, renewing the labor movement won’t happen quickly, and unions are unlikely to regain the hold they once had over business. More than 40% of UK union members are over 50 and most work in the public sector.
But instead of resisting workers’ efforts to organize, businesses and governments should foster the kind of relationships that exist in places like Germany. Here, too, union membership has declined, with workers’ representatives sitting on company boards, giving employers a better idea of the competitive and cost pressures facing them. Chancellor Olaf Scholz will meet with trade unions and business leaders next week to discuss how to avoid a wage-price spiral.
French President Emmanuel Macron hopes to overcome chronic labor unrest and “rebuild the social contract between labor and capital” through employee profit-sharing schemes. Even the most hard-nosed US capitalists realize they have to change: KKR & Co. He received six-figure payouts when the business was acquired last month, as he gave equity to employees in his portfolio companies.
What better way to defuse the debate about corporate profiteering fueling inflation than by giving workers their fair share?
More from Bloomberg Opinion:
• UK rail strike cautionary tale for US workers: Clive Crook
• Unions haven’t kept up with the new economy: Allison Schrager
• Britain’s summer of discontent batters conservatives: Martin Ivens
(1) See Declining Worker Power Hypothesis
(2) Although UK workers’ share of national income is lower than in the 1970s, it has been fairly flat since 2000
This column does not reflect the opinion of the editorial board or Bloomberg LP and its owners.
Chris Bryant is a Bloomberg opinion columnist covering industrial companies in Europe. Previously, he was a reporter for the Financial Times.
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