The uK public Sector Strikes –all you need to know about Airport & rail strikes, what impact do these have on the Economy? &

why are they striking?

Jamie & olly

Rail – Recently, rail trade unions have been in dispute with both the government and rail companies, regarding wages, job cuts and changes to terms and conditions. Trade union members say that the wages of the workers should reflect the rapidly increasing cost of living, and they feel that the wages that they receive are insufficient to be able to meet daily needs. The Office for National Statistics (ONS) has estimated the average salary of rail workers in 2022 was £45,919. However, when drivers are excluded, the average salary falls to £39,518. Despite this, the RMT still suggested that this figure was too high, as it did not include the rail cleaning staff when calculating the average. In addition to the insufficient wages, there is also significant job uncertainty in the rail industry. Network Rail is planning to cut 1,900 jobs as part of changes to the way its maintenance teams work. With these factors combined, it has led to the strikes, to signal to employers to reduce planned job cuts and increase their wages.

Airport strikes - UK Border Force staff were also striking over the busy festive holidays at airports across the country in a dispute over pay and working conditions. Passport checks at Heathrow, Gatwick, Manchester, Glasgow, Cardiff, and Birmingham airports were amongst those disrupted, the PCS (public and commercial services) union stated. Days affected included 23rd and 28th of December causing nightmare for hundreds of thousands of people trying to see their relatives over the festive period. The announcement for the beginning of these strikes came on the same day Rishi Sunak promised “new tough laws” to curb the impact of industrial action as he criticised “unreasonable” unions. Mark Serwotka, the PCS General Secretary, announced the dates after 100,000 PCS members in 214 government departments and other public bodies voted to act in support of a 10% pay rise, pensions, job security and no cuts to redundancy terms.

Why are the strikes not working? The government and companies are unwilling to offer higher wages to the workers due to several reasons. Arguably, the most significant one is the governments fear of the wageprice spiral. This model involves the workers initially bargaining for higher wages. For the process to work, we assume that the workers then receive these higher wages. Because these workers are mostly members of lower socio-economic groups who are struggling with the cost-of-living crisis, their marginal propensity to consume (MPC) is likely to be large. A high MPC means that the workers spend a large proportion of their increased income in consumption. Consequently, the increased demand for goods and services in the economy (due to the increase in wages and resultant spending) will lead to demand pull inflation. Inflation is already at 9.2%, so it is adding to a already dire situation. Again, the increased inflation will mean that the purchasing power of the workers’ income falls, leaving them in yet another cost-of-living crisis as they cannot afford the necessities. Ultimately, the economy is left in the same situation it was before, only with higher inflation which is detrimental to the economy. So, after taking this into consideration, it seems reasonable that the government is unwilling to increase the wages of the rail workers. Effect on the economy? Rail cancellations have hit a record high, with more than 314,000 fully or partly cancelled trains in Great Britain in the year to October 2022. Britain’s pandemic-hit hospitality sector will have lost £2.25billion to strikes this year if unions thwart hopes of a Christmas boost via promoting and organising strikes. And with transport strikes costing the economy £300million a day, Britain now faces a £4billion bill. The Treasury has warned that giving all public sectors an 11 percent pay rise in line with inflation would require the equivalent of a hike in the basic rate of tax of more than 4.5 percentage points, or a VAT increase of more than 3.5 percentage points. It says the total cost would come to around £28billion or the equivalent of £1,000 per household. The Institute of Economic Affairs says the country could lose £300 million per day because of people not being able to work or going on strike. In conclusion, because of these strikes domestic demand-pull inflation would skyrocket further due to an increase in real incomes, and furthermore domestic economic growth is being run into the ground with output and productivity being slashed due to the union led strikes.