Will worker-company conflict end?

In all the years I’ve covered business, I’ve never seen such a collision between employees and employers.

This winter has seen one of the largest levels of work stoppages in recent memory, as millions of public and private sector employees demand bigger wage increases to match the growing cost of living.

According to the Financial Times, more than one million working days would be lost to strike action by the end of December. As nurses, transport workers, postal workers, and baggage handlers, among others, have organized strikes in the three weeks preceding the New Year, the next three weeks resemble an advent calendar of disruption.

The stoppages are affecting people’s daily lives as well as companies that rely heavily on commuters for revenue. The CEO of pub chain Fuller’s recently told that rail disruptions could impact business over the “crucial” Christmas season, causing consumers to cancel parties and employees to lose tips.

The collision path between employees and employers is not difficult to grasp. The rising cost of living has outpaced wage growth in both the public and private sectors, so the majority of workers are becoming poorer every day.

The expense of living is increasing at a rate not seen in nearly four decades, primarily due to the war in Ukraine and the aftermath of the pandemic.

Energy and food costs have skyrocketed, leaving many individuals unable to pay their obligations.

This year has seen the steepest decline in living standards ever recorded. Public sector employees have been hit the hardest, with an average annual basic pay increase of 2.2% lagging far below the inflation rate of 11.1%.

Those with lower salaries have felt the impact the greatest since they spend a larger portion of their disposable money on heating and food, which have experienced some of the most staggering price increases.

Public sector employees typically enjoy more job stability and more generous pension plans, although this may be of little solace when paying obligations in the present.

Employers in the private sector have also been hampered by the fact that the same rampant inflation that has pushed up their prices has also emptied the coffers of their consumers, leaving less room for wage raises.

ManpowerGroup, one of the largest recruiters in the United Kingdom, told that the wage-price difference was “placing increasing pressure on households.”

However, when the government is the employer and the employees provide essential public services, as with nurses and ambulance drivers, the social and political stakes are enormous.

There are two reasons why the government cannot match inflationary wage increases.

The first is that it would be financially unfeasible. At 97.5% of national income, government debt is already close to its highest level since the 1960s, and it is anticipated to climb during the next two years, as the government will continue to spend more than it collects in tax revenue.

This week, Health Secretary Steve Barclay estimated that granting all public sector employees an inflation-matching wage increase would cost £28 billion, or about half of the whole defense budget. However, IFS research indicates that the figure would be closer to £18 billion.

Even though this is still a large amount of money, the government expects to recuperate roughly 30 percent of this amount through higher tax and National Insurance payments.

It would still increase government borrowing, but based on figures from the International Monetary Fund, the United Kingdom has one of the lowest debt loads among the G7 group of major global economies, so there is probably room for a bit more spending.

The second argument of the government is that putting more money in people’s pockets could keep inflation higher for a longer period.

This would make everyone worse off over time and raise the pressure on the Bank of England to use its authority to curb price increases by increasing interest rates, which impacts the cost of borrowing for consumers, homes, and businesses.

There is no straightforward answer to these numerous arguments short of providing everyone an inflation-matching (and potentially inflation-inducing) wage raise.

A worker’s frustration over their declining level of living is another person’s frustration over the disturbance that is expected to dominate Christmas news coverage.