Employment

As the previous economic crisis snowballed in 2008, one of the first things companies did was tighten their belts. Mass redundancies and administrations became commonplace, and many people, from Lehman Brothers bankers to Woolworths shop-workers, found themselves out of a job. By the end of 2011, 2.7 million people in the UK were out of work, causing the quarterly unemployment rate to climb to 8.4 per cent, its highest since 1995. Almost a year after Vladimir Putin’s invasion of Ukraine pushed the problems still simmering after the pandemic into a full-scale, inflation-fuelled, global economic crisis, a very different picture of Britain’s labour market is emerging. Figures published today (17 January) by the Office for National Statistics (ONS) show that, in spite of soaring inflation, sluggish GDP growth and an interest rate that just keeps climbing, unemployment is still surprisingly low: in the three months of September to November, unemployment edged up just 0.2 percentage points to 3.7 per cent, while the number of payrolled employees climbed by 28,000. Meanwhile, economic inactivity – one of the measures worrying economists because, in the wake of the pandemic, it has remained unusually high – fell 0.1 percentage points. In the context of increasingly heated industrial disputes, does what economists refer to as “tightness” in the labour market provide strikers with a decent bargaining chip? The ONS said 467,000 working days were lost to strikes during November, the most since 2011. Karl Thompson, an economist at the Centre for Economics and Business Research (CEBR) told me that the total cost of days lost to strikes between June and January will be about £1.4bn – and that’s without the knock-on effect of the rail strikes, which will add another £500m to the total. This week, nurses, Welsh ambulance workers, bus drivers and staff at various government agencies will walk out in disputes over pay and conditions – but although their employers may appear in the media complaining vociferously about “greed”, today’s figures indicate that their negotiating position is, frankly, pretty weak. Take nurses, who will walk out on Wednesday (18 January) and Thursday (19 January): in September last year, the number of nursing vacancies in the NHS reached a record high of 47,000, figures by NHS Digital showed – a 21 per cent rise on the year before. Basic laws of supply and demand indicate that, when an employer has roles it can’t fill, it will offer to pay more until enough people take those jobs. But that’s not what is happening: today’s ONS figures show that average pay growth in the public sector was 3.3 per cent in the three months to November, far lower than for the private sector, which was 7.2 per cent – and considerably lower than inflation, which peaked at 11.1 per cent in October. The government’s – and the Bank of England’s – argument is that over-enthusiastic pay rises will only fuel inflation further. But stories from the NHS front line, of exhausted doctors and nurses being forced to cover several shifts in a row because there just aren’t enough bodies to fill gaps in the rotas, show that argument doesn’t hold much sway: because the NHS won’t give them more money, many of its workers are seeking it elsewhere, in the private sector and even, in many cases, abroad. In November it was even reported that NHS workers were quitting to take jobs at supermarkets because they could earn more that way (earlier this month, Sainsbury’s offered its lowest-paid workers a 7.3 per cent pay rise). Faced with those kinds of economics, the obvious choice for the government seems to be to recognise that nursing is a highly skilled job, and raise wages accordingly. There’s one problem, though, according to Thompson: while the smaller pool of available workers – depleted, ironically, by longer NHS waiting times – has “improved the bargaining position of the individual worker”, union participation is relatively low, which gives them less power. “The collective bargaining power of workers has been weakened,” he said. Nonetheless, he believes December’s labour market figures, due to be published next month, will tip the number of days lost to strikes to over 1 million in 2022, the first time since 1989 that has happened. “We are seeing how coordinated cross-industry strike action can get us almost close to where we were in the 1980s,” he said. The situation will change, eventually. Economists believe that the labour market will begin to weaken later in the year, with unemployment climbing to “4 or 5 per cent”, said Thompson, putting strikers in a weaker position. But for now, unions are in a position of strength. “There is a healing process for the labour market,” said Simon French, the chief economist at Panmure Gordon. “The quicker the healing takes place, the faster the bargaining power falls. But the longer that scarring from the pandemic and Brexit goes on, the more power employees will have.” [See also: Is Rishi Sunak's anti-strike law a trap for Labour?]

Why strikers now have the upper hand

The UK’s GDP figures look good, but they don’t tell the whole story

Sick Britain: how economic inactivity has surged

Sick Britain: where have the workers gone?

Inactivity due to sickness has reached a record high in the UK

From energy prices to inflation: how Liz Truss plans to tackle the economy

Flat wages, surging stocks: how the rich profited from a 13-year stock market surge

UK suffers highest fall in employment rate in the G7