If you live in Britain, one of your new Sunday night routines is probably to check which public sector workers are on strike the following week. Tuesday – remember to avoid trains. Wednesday – try not to get sick.
There has been plenty of talk about who is “winning the argument” in this stand-off between ministers and trade unions. The government wants to be seen as a firm-but-fair bulwark against the unreasonable wage demands of union barons. Unions want to be seen as the defenders of essential workers like nurses who deserve a pay rise after years of austerity.
But it would be helpful to stop thinking about it as a political argument to be won, and start thinking about it as a set of industrial disputes to be resolved.
[ Sunak invites unions to talks over UK strikesOpens in new window ]
Set aside for a moment the question of who “deserves” a pay rise. The government has plenty of data on which particular job roles are suffering severe recruitment and retention problems.
This is the labour market making its own dispassionate judgment that pay, terms and conditions for these workers are not sufficient in the current economic context. Even if the strikes went away, these problems would persist until pay or conditions improved relative to the wider labour market.
The UK has pay review bodies which aim to make these sorts of assessments, but the process is too slow to cope with fast-moving events. The NHS pay review body recommendations in July, for example, were based on evidence submitted between January and March.
Inflation is higher and the labour market is tighter than was expected then, according to Gemma Tetlow at the Institute for Government.
Rather than refuse to negotiate over this year’s pay, the government could look to the private sector for examples of how to be more flexible. One popular strategy in corporate Britain has been to make one-off payments to staff on top of, or subsequent to, a consolidated pay rise.
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According to Incomes Data Research, roughly one in five UK employers did this in 2022. Rolls-Royce, for example, gave a £2,000 cash lump sum to 11,000 shop-floor workers and 3,000 junior managers last summer.
While unions don’t in principle tend to like lump sums over consolidated pay rises, they have shown “a willingness to think creatively about what members need to help with cost of living now”, says Kate Bell, assistant general secretary of the Trades Union Congress.
One-off lump sums could also help to ease the government’s fears about fuelling higher inflation (though I think the risk is remote given public sector wage growth lags so far behind the private sector).
In Germany, the government has tried to gently co-ordinate with employers and unions to avert the risk of a wage-price spiral. As part of this effort, it has given employers the option to pay a one-off bonus of up to €3,000 which would be exempt from income tax and social contributions.
You can’t legislate your way into better labour relations
Sebastian Dullien, a professor of economics at HTW Berlin – University of Applied Sciences, says this has helped unions to accept lower consolidated pay rises because workers’ take-home pay would still get a healthy boost. IG Metall, Germany’s influential biggest union, agreed a below-inflation pay deal in November of 5.2 per cent in 2023 and 3.3 per cent in 2024, supplemented by the tax-free bonus. Economists at the time called it a “goldilocks” deal that made a wage-price spiral less likely.
Dullien says Germany’s more “consensual approach” to industrial relations might not always be better when it comes to innovation, but it still proves useful “when you have to decide who has to bear the cost of a crisis or a shock”. The UK might not have Germany’s history or institutional framework, but it could still find a better solution, he added.
“If you bargain only on one dimension, it is very obvious who gains and who loses, and giving in comes with a lot of costs. But if you add additional dimensions, you can come up with a package where both sides can give in without losing face.”
There are plenty of other dimensions the government and unions could bring into their negotiations, from training to pensions, which remain much more generous than in the private sector, and could perhaps be partly diverted into better pay.
The UK government announced plans for a new law last week to make sure a minimum level of public service continues during strikes. But you can’t legislate your way into better labour relations.
Its press release explained the government “has a duty to the public to ensure their safety, protect their access to vital public services, and help them go about their daily lives”. The best way it can do that is by being a grown-up employer and negotiating a solution. – Copyright The Financial Times Limited 2023
