Now is a bad time to go on strike

The British Airways strikers seem blissfully unaware that they are putting their jobs at risk.

You may be surprised to learn, amid fierce industrial disputes at both British Airways and Network Rail, that strikes are a thing of the past. Only one in seven British private-sector workers is a member of a trade union these days, according to preliminary data from the Labour Force Survey for 2009, compared with over half of workers in the public sector. Union membership is down from a high of 13 million in 1979 to 7.5 million today.

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The chart (above) shows that, as both unemployment and union membership have fallen, so has the incidence of strikes. In January 2010, only 4,000 working days were lost to disputes, compared with nearly 12 million days in September 1979. Last year, 86,000 days were lost due to strikes in the private sector, compared with around 370,000 in the public sector, even though the private sector is three and a half times as large. Private-sector strikes are pretty rare in these days of flexible labour markets.

The latest investment data published by the Office for National Statistics showed a steep decline in the final quarter of 2009. Business investment fell 4.3 per cent between October and December and 23.5 per cent year-on-year - the largest annual drop since records began in 1967. Commenting on these figures, David Kern, chief economist at the British Chambers of Commerce, said: "In the face of weak demand and severe financial pressures, businesses have had little choice but to cut investment and stocks. This situation cannot go on indefinitely without damaging consequences."

Proceed with caution

At such a difficult time for the UK economy, with high and rising unemployment, low investment and limited spending, it is probably not a great idea to call a strike. Workers usually have very little bargaining power in a recession.

Business conditions are especially tough in the highly competitive airline industry. At the end of last month, Highland Airways declared itself insolvent. BA reported an annual loss of more than £400m last year, and has only just got over the publicity nightmare of the botched opening of Terminal Five. However, BA shares have gained more than 9 per cent since 12 March, when Unite announced that its members would strike. Clearly, the markets are expecting concessions from the union.

Worryingly, more BA flights were cancelled on 27-28 March as cabin crew launched a second strike. BA predicted there would be less disruption than during the previous weekend's action, when it said it brought in 1,000 volunteer cabin crew and 22 chartered jets to break the strike. The strikers seem blissfully unaware that they are putting their jobs at risk yet are unlikely to get the concessions they want.

In a letter to the Guardian, 95 employment relations academics from a range of universities wrote that "it is clear to us that the actions of the chief executive of British Airways, notwithstanding his protestations to the contrary, are explicable only by the desire to break the union which represents the cabin crew". They added that a victory for the company would bring “a triumph of unilateral management prerogative" and "an erosion of worker rights and democracy", whatever that means. But BA's actions are more easily explained by the need to return to profitability. No BA, no jobs.

Get real. BA is a public company owned by shareholders who expect a return on their investment. It is not a charity run for the workers' benefit. The strike is good news for BA's competitors. Uncompetitive compensation levels could put BA out of business. After General Motors saddled itself with overly generous health-care benefits for its workers and retirees, which are not offered by many of its competitors, it needed a public bailout to survive.

I would urge a little caution on the part of all those involved in this dispute, as the negative consequences could be severe and long-lasting. There is some instructive evidence from one notable union-employer dispute in the transport industry, which had a huge impact on product quality and safety. In August 2000, Bridgestone/Fire­stone and Ford announced the recall of 14.4 million tyres, mostly on Ford Explorers. The recall was linked to 271 fatalities and more than 800 injuries. The most common source of failure was a sudden detachment of the rubber tread from the steel belts on the radials, causing the tyre to blow out. In large part tyres are still made by hand, so there is scope for human error in producing them.

In place of strife

In a paper published in 2004 in the Journal of Political Economy, entitled "Strikes, Scabs and Tread Separations: Labour Strife and the Production of Defective Bridgestone/Firestone Tyres", Alan B Krueger of Princeton University and Alexandre Mas (now of the University of California, Berkeley) found that labour strife closely coincided with lower product quality.

The authors found that defects were particularly high around the time concessions were demanded and when large numbers of replacement workers and returning strikers worked side by side. One in every 400 tyres produced at the Bridgestone/Firestone plant in Decatur, Illinois, in 1995 was returned under warranty because of a tread separation by 2000. Bridgestone/Firestone's stock-market valuation fell from $16.7bn to $7.5bn in the four months after the recall was announced, and its top management was replaced. The company closed the Decatur plant in December 2001.

The danger now is that unhappy travellers may abandon BA. I have plans to come over to the UK again this month and have booked with Virgin Atlantic rather than face possible disruption from any further BA strikes. Virgin operates only one flight a day on the Boston route compared to BA's three.

I suspect Virgin will be adding more flights shortly as folks like me give up on BA - although now Virgin pilots are apparently demanding new negotiations on pay and are considering industrial action . . .

And then the strikers will lose their jobs. It is time for calm heads to prevail.

David Blanchflower is Bruce V Rauner Professor of Economics at Dartmouth College, New Hampshire, and the University of Stirling