by Earlier this year, there was a lot of talk about the empowerment of ordinary workers. Post-pandemic labor shortages have left employers struggling to recruit for all kinds of positions, especially in hotels, fast food restaurants, warehouses and other jobs where wages and conditions can be mediocre. Job vacancy rates increased in Australia, Canada, Germany, the UK, the US and France, among others.
The unions, meanwhile, were depleted in terms of membership but seemed to be sparkling with new energy. In the US, that mood was bolstered by the election of Joe Biden, who promised to be “the most pro-union president you’ve ever seen”. After four decades of capital dominating labor, was the pendulum beginning to swing the other way?
As we approach the end of the year, it is difficult to say that 2022 has been a good year for workers. Labor shortages persisted and wage growth accelerated quite sharply in some countries such as the US and the UK. But compensation has not kept up with soaring prices. As a result, global wages have fallen in real terms this year for the first time since comparable records began, according to the International Labor Organization.
Labor’s share of global income has also fallen, according to ILO calculations, as productivity growth has outpaced wage growth by the widest margin since 1999. In the UK, a decade of stagnant growth in pre-pandemic wages is now expected to be followed by the steepest fall in household living standards in six decades, according to official forecasts. Central bankers continue to fear that wage inflation is spiraling out of control. But to me, it doesn’t look like a wage-price spiral. It looks like a bloodbath on the standard of living.
Why have workers suffered such steep real wage cuts, even though the labor market is tight? The last time there was a severe inflationary spurt in the 1970s, workers managed to secure wage increases high enough to maintain their standard of living (it was a veritable wage-price spiral, and it ended in pain). In the UK, real wages actually grew by an average of 2.9% per year throughout the 1970s, according to economist Duncan Weldon in his book Two hundred years of jamming. A sign of ever-increasing prosperity, the number of car owners rose from 45% in 1970 to 70% in 1980.
The labor market works very differently today. Higher levels of globalization, automation and self-employment have changed the balance of power between workers and employers. The same goes for declining union membership, which has halved on average in OECD countries since 1985. The coverage of collective agreements signed at national, sectoral or company level has fallen by one third.
It is not just unions that matter for wages in times of high inflation, but the structure of wage agreements. In the United States, for example, the proportion of workers under collective agreements linked to inflation by “cost-of-living adjustment” clauses rose from around 25% in the 1960s to 60% at the end of 1970s. By the 1990s, that number had dropped to 20%, and in 1996 the government stopped collecting the data. In the euro zone, only around 3% of private sector employees have their salaries and minimum wages automatically indexed to inflation, according to an analysis by the ECB last year.
Yet even as workers have struggled to keep up with inflation this year due to their structural lack of bargaining power, have unions used this moment to begin a renaissance that could shift that balance of power at home? ‘coming ?
I think it’s too early to make that call. In the United States, the labor movement has made progress in areas where it typically struggles to attract members, such as Starbucks branches. But a successful grassroots effort to unionize an Amazon warehouse in New York has proven difficult to replicate so far. Joe Biden also disappointed labor activists after intervening to prevent a railroad strike. In the UK, unions won double-digit pay deals for some in-demand workers like truckers, but their attempts to improve public sector workers’ wages ended in widespread strikes. The government refuses for the moment to cede ground.
That said, the mood seems to have changed over the past tumultuous years. More workers have simply had enough and are ready to stand up collectively to demand better. The public seems more willing to support them. The big question is whether all of this will survive an even tougher economic environment and weaker labor market, both of which seem to be looming. If 2022 was ultimately not the year of the workers, it seems unlikely that 2023 will be either.
sarah.oconnor@ft.com
