The U.K.’s Labor Unrest Could Go Global
This month, the U.K. is set to experience work stoppages across almost every public service. Rail workers, teachers and nurses are among the hundreds of thousands of union workers who have announced that they will go on strike, with industrial actions scheduled to take place on all but a few days in January.
Paul Nowak—the newly appointed general secretary of the Trade Unions Congress, a federation of almost 50 unions—has further warned of the possibility of a “rolling wave” of industrial action throughout 2023. This would see trade unions coordinating the timing of strikes to cause maximum disruption unless the Conservative government of Prime Minister Rishi Sunak engages in “serious and sensible discussions about pay.”
Until recently, public support for those on strike—especially health workers—has remained high. A YouGov Poll taken in mid-December, for example, found that two-thirds of the British public supported the first-ever National Health Service nurses’ strike. With strikes affecting more and more facets of daily life in the U.K., however, patience is likely to start wearing thin.
Sunak faces a tough job ahead. All of his economic goals for 2023, including his recently announced plan to halve inflation in the U.K., will need to be balanced against the prospect of escalated industrial action and increasing public frustration. Finance Minister Jeremy Hunt will also need to carefully consider how strike action will affect his goal of filling the £55 billion—or $66 billion—hole in the U.K.’s public finances, which contrary to union workers’ demands can only be achieved through cuts in public spending.
Sunak and Hunt’s response to the strikes could make or break the Conservative Party’s chances of reelection in elections that must take place no later than 2024. For now, with negotiations with unions deadlocked, the government has announced plans to introduce a bill that would limit the ability of key workers, such as firefighters and health care professionals, to strike. Nowak, of the Trade Unions Congress, said that if passed, the bill “will prolong disputes and poison industrial relations—leading to more frequent strikes.”
At first glance, the chaos being caused by industrial action in the U.K. may seem like the latest in a long line of self-inflicted problems. After all, British policy has contributed to the country’s cost-of-living-crisis, which is at the heart of union workers’ demands for pay rises.
For example, Liz Truss and Kwazi Kwarteng—Sunak’s and Hunt’s predecessors, respectively, caused tremendous damage to the British economy last September by announcing an almost comedic “mini-budget” that ruined Britain’s financial credibility, crashed the pound and sent inflation rates soaring.
The whole world is getting older. By 2050, 1 in 6 people globally will be over the age of 65, up from 1 in 11 in 2019
Looking further back, Britain’s decision to leave the European Union in 2016 is also partly to blame for the country’s current economic challenges. Indeed, data collected by the Peterson Institute for International Economics revealed that in May 2022, even before the effects of the Russia-Ukraine war could be felt, inflation was 1.6 percentage points higher in the U.K. than in Germany and nearly 3 percentage points higher than in France. According to Huw Pill, chief economist of the Bank of England, these differences can almost certainly be attributed to Brexit, since Britain’s departure from the EU increased labor shortages and reduced competition between firms, both of which are inflationary.
Finally, austerity policies pursued by successive Conservative governments in the years since the 2008 financial crisis weakened the resilience of the country’s public services, leaving the U.K. highly susceptible to inflationary shocks.
Consecutive poor decisions made by the Conservatives, therefore, are at least partly to blame for the U.K.’s record-high inflation rates. And with food inflation, for example, hitting an alarming 16.5 percent in October 2022, and real wages failing to keep pace, it’s hardly surprising that so many people are demanding better pay.
That said, policy mistakes are not the only reason for the cost-of-living crisis afflicting the U.K. Other factors must be taken into account, most obviously, Russia’s invasion of Ukraine. Restricted access to Russian gas and oil as a result of the Russia-Ukraine war rapidly pushed up the price of fuel last year. As many countries now begin to cut back their Russian oil purchases, it is likely that prices will go up even more. Rising fuel prices have undoubtedly precipitated higher-than-average inflation rates in the U.K. and have even hurt those countries without a clear stake in the war.
Another more surreptitious factor behind inflation in the U.K. is demography: The country is rapidly ageing. By 2040, nearly 1 in 7 Britons is projected to be over the age of 75. And this ageing has an effect on inflation.
As Charles Goodhart and Manoj Pradhan argue in their book, “The Great Demographic Reversal,” aging populations are likely to lead to a “resurgence of inflation,” because as societies age, workforces shrink. Smaller workforces in turn have greater bargaining power, which pushes up wages and eventually inflation. At the same time, since older people are more likely to suffer from a variety of health conditions, aging is likely to lead to a “crisis of caring,” in which public services struggle to cope with greater demand. And since this demand can only be met by greater public spending, inflation will likely rise even further.
Goodhart and Pradhan’s primary case study is China, but arguably what we are witnessing in the U.K.—ongoing strike action and a struggling health care sector—is the beginning of the U.K.’s Great Demographic Reversal. If this is true, then the country must brace itself for the long-term “resurgence of inflation” that Goodhart and Pradhan predict.
Yet aging is not unique to the U.K.—the whole world is getting older. By 2050, 1 in 6people globally will be over the age of 65, up from 1 in 11 in 2019. And if Goodhart and Pradhan are correct, this demographic shift will have profound economic implications for everything from the cost of living to retirement ages. That, in turn, will have political consequences.
Other countries, especially those whose societies are rapidly aging, should look at the U.K.’s politically mobilized labor movement and the pressure it is exerting on a government facing significant fiscal constraints as a foreshadowing of what could be in store for them. One thing is certain. Trying to sweep the problem under the rug, as Sunak and Hunt appear to be doing, won’t be enough.
Aishwarya Machani is a U.N. Foundation Next Generation Fellow. She led a consultative process bringing together hundreds of young people from around the world to contribute to the U.N. secretary-general’s “Our Common Agenda” report. She also co-authored “Our Future Agenda,” an accompanying vision and plan for next and future generations. She graduated from the University of Cambridge in 2020 and is currently pursuing a master’s degree in environmental policy and regulation at the London School of Economics.