Rising inflation, an economy falling to the bottom of the world league tables and a summer of strikes ahead. As Boris Johnson tries to re-establish the political agenda, the economic context could hardly be worse.
This week, the government will face more worrying news, with official figures for Monday expected to show that the economy was close to a halt in April as families struggled with a record increase in energy bills. On Tuesday, new data is likely to confirm that wages have not kept pace with the cost of living again, while the Bank of England is expected to lower interest rates to tighten the screw on corporate debt. households and businesses.
To repair a damaged political reputation and prevent a recession, it is said that the Prime Minister will soon plan a major speech to restart the economy. Johnson, however, faces an additional headache over the strike action that could extend into a summer of discontent.
In a context of high inflation, falling living standards and severe shortages of workers in some sectors, wage discussions are inevitable. Railroad workers are planning three days of national strikes this month in the largest march since 1989, as unions are demanding fair treatment in wages and guarantees against job cuts.
So far, Johnson has sought confrontation, warning that larger wage deals could threaten a 1970s-style wage-price spiral that would force Threadneedle Street to further raise interest rates. In the midst of the cost of living crisis, it also wants to cut more than 90,000 public sector jobs. But beyond the railways, more industrial action could be going down the track.
NHS workers in England are preparing for a wage agreement below inflation that would allow nurses to suffer a real impact of £ 1,600 on their income this year. The government is expected to announce a series of public sector-wide payment agreements soon for the current fiscal year, dated earlier in April. Ministers have argued that “financial restraint” is necessary, but that carries the risk of widespread unrest. Last week’s viral video of a nurse telling patients at a health center full of people who could face a 13-hour wait resounded for many NHS staff.
Public sector workers have good reason to be angry. Those on the national payroll, including millions who served on the front lines of the pandemic, are facing much slower wage growth rates than those in the country as a whole. Official figures show that private sector annual wages are up 8.2%, compared to just 1.6% in the public sector. This means that doctors, police, teachers and officials are facing a much greater impact on living standards due to rising inflation.
In contrast, city workers have enjoyed optimal pay, following a boom in banker bonuses and rapid wage growth for professional and IT service workers. The UK is facing a further rise in inequality, which was already at high levels after decades of slow average wage growth.
However, the strike action may still be limited to specific pockets of the economy. Trade union membership is at an all-time low after decades of declines, from a high of more than 13 million in the 1970s to 6.4 million last year, less than a quarter of the workforce. . With the fall in numbers, there has been a decline in strikes, with the number of days lost by industrial action at one of its lowest rates since records began in the 1890s. this trend will be reversed this year, but it will not come close to the records set in the 1970s and during the 1926 general strike.
As Bank of England Governor Andrew Bailey has warned, workers with less bargaining power to demand a higher wage will bear the brunt of inflation. Those with precarious work and zero-hour contracts will face the greatest impact.
If the national rail strike continues, it will come at a cost. While more people can work from home after the pandemic caused an increase in remote work, about half the workforce is unable to do so. The Center for Economics and Business Research estimates that a three-day strike would cost £ 91 million in lost production.
With the aftermath of the strikes adding to a bleak economic outlook, the prime minister’s recovery plan could soon derail.