This is the fifth instalment in our series on where the global economy is heading in 2023. It follows recent articles on inflation, energy, food and the cost of living.
Canada: assertive unions getting results
Jim Stanford, Economist and Director, Centre for Future Work, Australia Institute
Canada’s trade union movement is among the more resilient in the OECD, the club of developed countries. This is related to laws that prevent “free riding”, which is where workers can benefit from collective agreements without being union members.
Union density in Canada has been around 30% of workers since the turn of the century, although membership in the private sector is barely half that and slowly falling. In contrast, unionisation is high in public services (over 75%) and growing.
This relatively stability has left Canadian workers better prepared to confront the impact of inflation on their wages. Unions made higher wage demands than in recent decades, and more frequently went on strike (continuing a trend from 2021).
From January to October 2022, there were
145 strikes, and the final year tally will likely exceed the 161 in 2021 – itself a marked increase. A total of 1.9 million person-days of work were lost in strikes up to October (the highest in 15 years). Unlike in recent years, the majority were in the private sector.
A spring wave of strikes in construction in Ontario (Canada’s most populous province) symbolised the increased militancy. At peak, over 40,000 workers downed tools for higher wages, including carpenters, dry-wallers and engineers. Tentative agreements reached by officials were sometimes rejected by members, prolonging the strikes.
A second historic flash point came later in the year when Ontario’s right-wing government invoked a rarely used constitutional clause to override the right to strike for 55,000 education support workers. After unions in the public and private sector threatened a province-wide general strike, the government backed down.
Meanwhile, employer lockouts have virtually disappeared. This tactic, in which employers suspend operations until workers agree to terms being offered, had only been used eight times by October, compared to 60 per year a decade ago.
Annual wage growth increased modestly to an average of 5% by late in the year. That still lagged the 6.8% inflation, but closed the gap from 2021.
It remains to be seen whether this union pressure can be sustained in the face of rapid interest rate increases, a likely recession in 2023, and continued government suppression of union rights in some provinces.
United Kingdom: an olive branch for the health service?
Phil Tomlinson, Professor of Industrial Strategy, University of Bath
The UK’s latest winter of discontent is extending into 2023 as the country endures its largest wave of strikes in over 30 years. Most are in the public sector, where pay offers are well below inflation and significantly lag private companies.
The sense of grievance is high following the austerity and real-terms pay cuts of the 2010s. Strikes – estimated to have cost the UK economy £1.7 billion in 2022 – are being co-ordinated across different unions, adding to the public inconvenience.
The UK government has steadfastly refused to yield, however. It has hidden behind independent recommendations by public-sector pay review bodies, despite not always following them. They have also claimed that inflation matching public sector pay rises would cost each UK household an extra £1,000 a year, though this figure has been debunked.
The Treasury also echoes Bank of England concerns about setting off a wage-price spiral. Yet this is unlikely, given the current inflation is largely down to supply shocks (from COVID and the war in Ukraine), while average wage growth is well below inflation.
There is an economic case for a generous deal, especially in the National Health Service (NHS): with over 133,000 unfilled vacancies, better wages might help improve staff retention and recruitment. Of course, funding this in a recession involves tough choices.
Higher taxes would be politically difficult with the tax burden at a 70-year high. Higher government borrowing could aggravate inflation if accommodated by the Bank of England increasing the money supply through more quantitative easing.
Public opinion appears largely sympathetic to the strikes, especially in the NHS. But if the government relents in one sector, it sets a precedent for others, with potentially wider economic consequences.
For the NHS, it may instead bring forward public sector pay review body negotiations for 2023 to allow for an improved deal – possibly alongside a one-off hardship payment. Elsewhere it will probably hold firm and hope the trade unions lose their resolve.
Australia and New Zealand: strikes remain rare despite inflation
Jim Stanford, Economist and Director, Centre for Future Work, Australia Institute
Strikes in Australia have become very rare in recent decades, thanks to restrictive labour laws passed since the 1990s. Despite historically low unemployment and wages lagging far behind inflation, these laws continue to short-circuit most industrial action.
In 2022, union density fell to 12.5% of employees, an all-time low. As recently as 1990, union density was over 50% of workers. Union members can legally strike only after negotiations, ballots and specific plans for action have been publicly divulged (thus fully revealing union strategy to the employer). Even when there are strikes, they tend to be short.
A total of 182 industrial disputes occurred in the year to September. (The statistics don’t distinguish between strikes and employer lockouts, which have become common in Australia.) This is similar to the pre-COVID years, following a drop in 2020, and only a fraction of 1970s and 1980s industrial action.
The only visible increase in strike action in 2022 was a series of one-day protest strikes organised by teachers and health care workers in New South Wales, the country’s most populous state. Having put up with a decade of austere wage caps by the conservative state government, they decided they had had enough as inflation picked up.
Most other workers have been passive despite Australia experiencing among the slowest wage growth of any major industrial country. Nominal wages grew just 2% per year over the decade to 2021. That rose to 3.1% by late 2022, but it’s still less than half the 7.3% inflation rate.
Australia’s newly elected Labor government did pass a series of important labour law reforms at the end of 2022, aimed at strengthening collective bargaining and wage growth. That might herald incremental improvement in workers’ bargaining power in the years ahead.
The industrial relations outlook in New Zealand is somewhat more hospitable for workers and their unions. Union density increased in 2021, to 17% of employees (from 14% in 2020). Average ordinary hourly earnings grew an impressive 7.4% in the latest 12-month period – helped by a 6% boost in the minimum wage by New Zealand’s Labour government.
Industrial action remains rare – perhaps in part because workers are successfully lifting wages via other means. No official strike data is available for 2022, but in 2021, just 20 work stoppages occurred, down sharply from an average of 140 per year in the previous three years.
Indonesia: anger against labour law reforms
Nabiyla Risfa Izzati, Lecturer of Labour Law, Universitas Gadjah Mada
A few weeks ago, the government replaced its controversial “omnibus law” with new emergency regulation. This was in response to the Indonesian constitutional court finding it unconstitutional in 2021.
Passed in late 2020, the omnibus law embodies President Joko Widodo’s ambition to attract foreign investors by slashing red tape at the cost of employees’ rights. It made it easier for businesses to lay off employees without prior notice.
It also lowered statutory severance pay and extended the maximum length of temporary contracts, while ignoring worker safety. In 2022, its new formula to determine the minimum wage also resulted in the lowest annual increase ever. The law attracted much criticism from workers, activists and civil society organisations.
The new emergency regulation is arguably even more problematic. The majority of its provision simply copies the omnibus law. Several changes and additional provisions are confusing and overlap with previous regulations, as well as leaving many loopholes that could be exploited in future.
Yet despite complaints from workers and trade unions that the new rules were passed suddenly and without consultation, strike action is out of the question. Strikes are not popular because they can only be organised with permission from the company in question. If labourers hold informal strikes, employers also entitled to get rid of them.
Public protests are the obvious alternative, though pandemic rules restricting mobility and mass gatherings have made these difficult. Nevetheless, thousands or perhaps even millions of workers staged protests in their respective cities in the second half of 2022.
The workers wanted the omnibus law revoked, and for the government to not use the minimum wage formulations stipulated in the law. The demonstrations got more intense as the government raised subsidised fuel prices in September, which boosted already high inflation due to rising food prices.
The government has since issued a separate regulation to determine the 2023 minimum wage, so the demands were successful, although both workers and employers are furious that the minimum wage rules have changed again under the emergency regulation.
Clearly the protesters did not see the rest of the rules in the omnibus law removed. Some workers have been protesting on social media. This might not induce the government to change the law, but a few viral tweets have pushed several businesses to change abusive practices.
The controversy is likely to continue in 2023 and into the election year of 2024, especially amid possible massive layoffs in the midst of a global recession.
United States: worker protest showing signs of life
Marick Masters, Professor of Business and Adjunct Professor of Political Science, Wayne State University
US workers organised and took to the picket line in increased numbers in 2022 to demand better pay and working conditions, leading to optimism among labour leaders and advocates that they’re witnessing a turnaround in labour’s sagging fortunes.
Teachers, journalists and baristas were among tens of thousands of workers who went on strike. And it took an act of Congress to prevent 115,000 railroad employees from walking out as well.
In total, there have been at least 20 major work stoppages involving upwards of 1,000 workers each in 2022, up from 16 in 2021, plus hundreds more that were smaller.
Workers at Starbucks, Amazon, Apple and dozens of other companies also filed over 2,000 petitions to form unions during the year – the most since 2015. Workers won 76% of the 1,363 elections that were held.
Historically, however, these figures are tepid. The number of major work stoppages has been plunging for decades, from nearly 200 as recently as 1980.
As of 2021, union membership was at about the lowest level on record, at 10.3%. In the 1950s, over one in three workers belonged to a union.
The deck is still heavily stacked against unions, with unsupportive labour laws and very few employers showing real receptivity to having a unionised workforce. Unions are limited in how much they can change public policy. Reforming labour law through legislation has remained elusive, and the results of the 2022 midterms are not likely to make it easier.
Nonetheless, public support for labour is at its highest since 1965, with 71% saying they approve of unions, according to a Gallup poll in August. And workers themselves are increasingly showing an interest in joining them.
In 2017, 48% of workers polled said they would vote for union representation, up from 32% in 1995, the last time the question was asked.
Future success may depend on unions’ ability to tap into their growing popularity and emulate the recent wins in establishing union representation at Starbucks and Amazon, as well as the successful “Fight for $15” campaign, which since 2012 has helped pass US$15 minimum wage laws in a dozen states and Washington DC.
The odds may be steep, but the seeds of opportunity are there if labour can exploit them.
This is an excerpt from an article published on January 5 2023.
France: militant unions risk going too far
Stéphanie Matteudi-Lecocq, Chercheuse au LEREDS, Directrice practice Chez Alixio, Université de Lille
France in 2022 saw new industrial protests, from blockades of oil refineries, to unprecedented strikes at EDF’s nuclear power plants, to rail workers staying at home on public holidays.
TotalEnergies announced “super profits” in the second quarter of 2022 and increased CEO Patrick Pouyanné’s salary by 52% to €5,944,129. In September the militant CGT union demanded a 10% salary increase for workers and called for a strike at the group’s refineries.
Five of Total’s refineries went on strike, joined by two owned by ExxonMobil subsidiary Esso. Esso was already talking to its unions about a pay deal, but Total had only planned to open negotiations in November.
The strikes in the refineries threatened to bring France to a standstill, and the CGT used its power over this key resource to demand that discussions begin more quickly with Total (in the end, the company negotiated earlier and pay deals were done, ending the strikes by early November).
The strike at EDF’s nuclear power stations similarly gave the company’s workers the balance of power because it made it impossible for France to build up energy reserves (since fossil fuels had to be burned to make up for the lack of nuclear power). In the end, the company signed deals with the unions in October.
Unions may have succeeded in both cases, but they are arguably endangered by these kinds of practices. Too many trades union leaders remain stuck in their old militant ways.
There’s a fragile balance between negotiation and protest, and such ransom tactics might damage unions’ public image, making dialogue more difficult in future. In 50 years, the rate of unionisation in France has already halved from over 20% to around 10%.
It’s telling that two of the major strikes at the end of 2022, first by train workers and then by general practitioners, were initiated by groups independent from the unions. They both started spontaneously through social media and the unions found out very late.
In 2023 the unions have an opportunity to improve their influence if they manage to prevent the government from passing its unpopular bill on pensions, which seeks to raise the full pensionable retirement age from 62 to 64 or 65.
The unions have already announced their strong opposition to the bill. With major demonstrations due to take place after the full bill is presented today, January 10, it will be interesting to see their tactics.
This is based on an excerpt from an article published in October 2022.
Spain: unequal support measures could cause trouble
Rubén Garrido-Yserte, Director del Instituto Universitario de Análisis Económico y Social, Universidad de Alcalá
Global inflation is triggering a global economic slowdown and interest rates raised to levels not seen since before 2008. Interest rates will continue to rise in 2023, especially affecting economies as indebted as Spain.
It will undermine both families’ disposable income and the profitability of companies (especially small ones), while making public debt repayments more expensive. Meanwhile, inflation is expected to cause a sustained increase in the cost of the shopping basket in the medium term.
Government measures have partially mitigated this loss of purchasing power so far. Spain capped power prices, subsidised fuel and made public transport free for urbanites and commuters.
There were agreements with banks to refinance mortgages for the most vulnerable families. Plus there have been increases in pensions and public salaries and there are plans to raise the minimum wage.
However, many of these measures must necessarily be temporary. The danger is that they come to be seen as rights that should not be renounced. They also distort the economy and create problems with fairness by excluding or insufficiently supporting some groups. Private salaries will not rise enough to cover inflation, for instance.
The government’s measures have been such that there has been very little industrial action in response to the cost of living crisis. The danger is that they create a scenario where today’s calm may be the harbinger of a social storm tomorrow.
This article is part of Global Economy 2023, our series about the challenges facing the world in the year ahead. You might also like our Global Economy Newsletter, which you can subscribe to here.