Why industrial action is not always bad for employers

Two issues have combined to dominate the headlines over the last year. One is the spiralling cost of living; the other is a rise in industrial action by workers who have seen their wages rapidly devalued.

Salaries fell by 2.9 per cent in ‘real terms’ during 2022, as pay failed to keep pace with an annual rate of inflation that exceeded 11 per cent in October 2022 – its highest rate for 40 years.

Soaring bills for energy (with domestic gas prices up 129 per cent), food, and fuel have left many workers struggling to make ends meet following more than a decade of austerity.

It all adds up to the average worker being £11,000 worse off now than they were 15 years ago, according to thinktank the Resolution Foundation.

Manuela Galetto, Associate Professor of Industrial Relations and Co-director of the Industrial Relations Research Unit (IRRU) at Warwick Business School, said: “The cost of living crisis has certainly been a key factor in the amount of industrial action we have seen over the last year.

“However, it is not the only factor. It also comes down to supply and demand.”

In October, unemployment levels fell to 3.5 per cent – their lowest level in 50 years – despite the UK narrowly avoiding entering a recession.

Dr Galetto said: “Brexit created a more hostile environment for many workers from the EU. We saw many of them go back during the pandemic and they have not returned. On top of that, 400,000 people have fallen out of the labour market following the pandemic.

“We have seen so much supply stripped out of the labour market, without falling levels of demand. That has put workers and unions in a strong position.

“You don’t always need to resort to strike action to win significant settlements at a time like this. Employers will negotiate because they have little choice. Either they make concessions, or they find themselves in a position where they are unable to staff their operations.”

For example, hundreds of staff at British Airways called off action at Heathrow Airport last summer after agreeing an eight per cent pay increase.

In other industries, staff including nurses, ambulance staff, and rail workers, did take strike action before agreeing an improved pay offer.

Many journalists likened the increase in industrial action to the ‘Winter of Discontent’.

“I think that notion is unhelpful,” said Kim Hoque, Professor of Human Resource Management.

“It portrays the unions as anachronistic, stuck in the 1970s. In reality, all they are doing is defending their members’ interests in the face of rising costs and labour shortages.

“In 1978-9, there was something like 28 million days of strike action between November and February. We are light years away from that. The number of unions is smaller now, they have fewer members, and the process involved is not conducive to such widespread action.”

How unions and strike action can benefit bosses

Deborah Dean, Associate Professor of Industrial Relations and Co-director of the Industrial Relations Research Unit (IRRU) at Warwick Business School, said: “The language we use is important.

“People talk about strike threats, militancy, and union barons. This frames industrial action in a very specific way, presenting it as an external threat that has no place in the way society should operate.

“That extends to the contentious idea that strike action is measured in ‘working days lost’. There are less loaded ways of describing those days.

“The absence of unions doesn’t mean the absence of discontent among the workforce. What unions do is represent the workforce in a de-personalised way. They can channel inevitable, occasional conflict in manageable ways so it can be resolved. In fact unions have been called ‘managers of discontent’.

“There are always legitimately differing interests in the workplace. And if that’s not recognised then conflict  can find an outlet in other ways, such as increased turnover and absenteeism, reduced motivation, as well as difficulties in recruitment – so, other costs. 

“In some conditions, strike action can actually be beneficial for employers. It can save on labour costs, which may be helpful if a company is facing financial pressure.

“There may also be a productivity bounce after a strike action, which is fascinating.

“Taking strike action can have a profound and positive psychological impact for workers who spend their working lives being told what to do.

“This can be about feeling some reassertion of control over life and may help to explain why employers sometimes see an increase in worker productivity after industrial action.”

The recent rise in industrial action – and widely reported successes involving improved pay settlements – could have significant implications for unions.

Dr Dean said: “Support for strike action has remained pretty high, particularly among young people.

“That could be significant, because only about a quarter of union members are under the age of 35. There is a widespread lack of awareness so a sense of positivity towards strike action and trade unions could be helpful in recruiting more young members to address that representation gap.

“This could have a particularly strong impact in the private sector, because only about 13 per cent of private sector workers are currently unionised. We know that unions have already made inroads in the hospitality industry and in workplaces we wouldn’t usually expect, such as Amazon.

What impact will the Strikes Bill have?

“The cost of living crisis could create fertile conditions for unions to make further progress in representing people in those areas.

“The Government has responded by introducing the Strikes (Minimum Service Levels) Bill. The trajectory of legislation has for a long time made it increasingly difficult for trade unions to lawfully implement strike action, to the the point where the UK has among the most restrictive regulations in the western tradition of industrial relations.

“In 2022, an Act revoked the restriction on agencies supplying temporary staff to replace striking workers and another increased the maximum damages that can be awarded against a union if a strike is found to be unlawful. In light of this, it is arguable that the Strikes (Minimum Service Levels) Bill is actually aimed at trade unions as organisations.

“If passed, the Strikes (Minimum Service Levels) Bill will cover transport, health, fire and rescue, education, nuclear decommissioning and border security. It will mean the relevant Secretary of State - not Parliament - will have the power to make regulations determining the scope and levels of service to be provided.

“As the Institute of Employment Rights has said, “For the first time since the second world war, Parliament is being asked to authorise the requisitioning of workers. Those who fail to comply with the work order lose unfair dismissal protection.”

“The government’s approach seems to be to ignore the causes and try to control the strikes, which are the symptom of those problems.

“As any student of industrial relations can tell you, this a recipe for conflict manifesting in other ways, such as increased absences and job turnover. These effects are more costly and longer-lasting for employers as well as for workers.”

Further reading

The Industrial Relations Research Unit has provided shared its expertise with the media extensively during the cost of living crisis and the accompanying rise in industrial action.

Professor Dean and Dr Galetto have given numerous television, radio, and newspaper interviews. Some of their online news coverage is included below. 

Why no breakthrough in the junior doctors strike, BBC News

Strikes sweep Britain as soaring inflation savages living standards, CNN Business

Wildcat strikes: What employers need to know, Raconteur