Understanding the Escalating Frequency and Duration of Strikes Across the UK
By Isabella Parker and Anastasia Malikova
Introduction
Between June 2022 and February 2023, the UK economy experienced an increase in the frequency and length of strikes across many industries, particularly within the rail and bus network, civil service, education, and the NHS. This strike period was compared to the Winter of Discontent between November 1978 and February 1979, which also saw strikes by private and public sector trade unions. The impact of the most recent strike period has been widespread. Between June and December 2022, 2.472 million working days were lost. Industry sectors which saw the highest number of days lost were education, health and social work, transport, storage, information and communication (Figure 1).
GDP remained constant for most of this period, except in December 2022 when it fell by 0.5%. Although spending was not impacted, 7% of the overall population said they were unable to work due to rail or bus strikes (ONS, 2023). Due to the education strikes, 31% of parents reported they would have to work fewer hours, and 28% reported they would not be able to work. Moreover, there were 16 strike days between December 2022 and February 2023 within healthcare, which led to 158,000 appointments needing to be rescheduled (ONS, 2023).
Trade union participation in the UK also fell from 32.4% to 22.3% (Figure 2) (Clark, 2022). In some industries such as finance, union participation is predicted to be under 10% by 2024 (MitreFinch, 2021). However, trade union participation rates in certain industries are higher than average. For instance, education (49%) and health and social work (39%). Although the transport, storage and communication unionisation rate is slightly lower than average at 20%, it still contributed to 79% of the total days lost over the strike period (ONS, 2023).
This high union participation in the public sector is the result of a combination of the rising cost of living and the fall of real wages due to spending cuts. For example, nurses’ real-terms pay has fallen by 20% from 2010/2011 to 2022/2023 (Nuffield Trust, 2022). Similarly, teacher’s starting salaries have fallen by 6% in real terms between 2010/2011 and 2022/2023, and school executives’ real-terms pay similarly fell by 14–15% (Park, 2023). This has been caused by a decade of consistent spending cuts by the conservative government. For example, the Department for Health and Social Care budget has only increased by 1.5% every year since 2010/2011, compared to the 3.3% increase required to keep spending in line with rising UK population demand. This has left the NHS £23.5 billion worse off since 2010, leading to reduced budgets for wage increases. Similarly, since 2010/2011, education spending has been cut by £13.8 billion (PolicyMogul, 2019).
In contrast to the public sector, Private Train Operating companies have made more than £310 million in profits between March 2020 and September 2022, after the government put them on new contracts once the COVID-19 pandemic left them at a standstill. However, the real wages of rail workers were frozen in the same period. These profits were instead reinvested and given as dividends to shareholders. However, even accounting for reinvestment, the profits are enough to fund the 10.6% real pay increase the RMT workers have been striking for, while the Rail Delivery Group has only offered 4% (RMT, 2023).
The model
We use the Ashenfelter and Johnson model (1969) to analyse what is causing the increased frequency and length of union strikes in the UK. First, consider a profit-maximising firm which provides output Q at a fixed price P and employs a fixed number of workers M.
When wage contracts are updated, wages (W) are increased by proportion y, so the new wage rate is:
However, both the unions and firms have different desired values of y.
Union side:
The union workers strike if the new wage contract is not equal to Y0. As the firm is unlikely to offer Y0 and the strike persists, the union gradually decreases its position.
S is the duration of the strike and is a function of the union Y’s. Y* is the lowest conceivable wage increase the union will accept. Anything lower will be met with an indefinitely long strike. So when Y0 is far larger than Y*, the strike has a longer duration.
Firm side:
The firm seeks to maximise PQ-WM. The wage increase which would lead to the firm achieving breakeven profits is equal to YbWM.
YbWM (proportional wage increase) + WM (original wage) = PQ
So the highest proportion wage increase possible (Yb) without causing the firm to operate at a loss is:
The optimal policy for a firm is to set a target Yt, which is their desired wage increase to maintain profitability and satisfy shareholders, and settle as soon as the union’s Y0 demand reaches that target.
Yt is a weighted average of Yb (the highest wage they’ll give) and Y* (the lowest wage the union will accept), alongside a measure for how rapidly the union concedes (τ), and the firm’s cost of waiting (r).
Length of a strike:
When Yt equals Y0, there is no strike and both players are satisfied. Otherwise, the further Y0 is from Yt, the longer the strike will take as the union and firm have to adjust their demands until they coincide.
Probability/Frequency of a strike:
When Y0 > Yt, the firm does not grant the wage increase, increasing the frequency/probability of a strike. Decreases in Yt or increases in Y0 will increase the length and the probability/frequency of strikes, as the distance between the two demands grows. Thus, the length of the strike depends on how long it takes for the two players to adjust their demands.
Influences on τ:
A substantial strike fund reduces τ (how rapidly the union concedes), as union workers are less inclined to compromise when they have financial resources to sustain them during the strike period, despite not earning wages. Similarly, shortages within the sector (so a low unemployment rate for striking workers) mean that τ also decreases as strikers are aware of the opponent’s lack of strike workers, and thus the cost to the opponent is large. The strikers therefore are less likely to concede, as they know in the long run their strike is strong. Overall, this increases the value of Yt, keeping everything else constant. The intuition behind this is firms know the unions are going to elongate the strike, increasing the potential costs. Therefore, firms raise their target to prevent a strike from happening/reduce the length of time preemptively.
Influences on r:
Increasing r (making firms’ costs higher, such as higher losses in profitability during the strike) increases Yt. The intuition behind this is the firm is more willing to offer a higher wage increase to prevent these costs from happening.
Influences on Yb, Y0 and Y*:
An increase in firm profitability will increase Yb and thus Yt. Y0 and Y* may increase if unions become more aggressive, e.g. demand a higher wage increase due to cost-of-living, or their personal view of their labour productivity/value to the economy, and thus believe they deserve a higher wage.
Application of model:
Although the model focuses on profit-seeking firms, we can apply this model to the public sector. Public sector firms are managed by the government that efficiently allocates the government budget (PQ), so costs such as public sector wages (WM) are kept constant/low and fall in real terms. Thus, governments acting on behalf of public sector firms still have the maximum wage increase they can provide within the existing government budget, Yb. The government budget is also exogenous, similar to profits in the model. Government budget increases in response to strikes can be interpreted as firms becoming more profitable within the model for example.
We can apply the model to rail as the rail companies are typical profit-seeking companies looking to maximise PQ-WM to provide dividends to shareholders and reinvest profits into the large rail system.
We focus on healthcare, education and rail as these three industries contributed to the most lost days within the strike period. Additionally, healthcare and education both have significantly high trade union membership of 49% and 39% respectively.
Analysis
Utilising the model, we can infer that the rise in both the frequency and duration of strikes can be attributed to the increasing difference between Y0 and Yt. In the current economic climate, the increase in Y0 (representing the desired wage increase for workers) can be explained by the substantial decline in rail and public sector workers’ real wages. Contributing factors include the cost of living crisis, the decoupling of wages from productivity, and cuts in the UK government’s budget. The decrease in Yt (representing the optimal wage increase for the government and rail companies) can be explained by the UK’s significant budget deficit, the shortage of workers in the public sector, diminishing trade union power and the COVID-19 epidemic.
Firstly, we will focus on the recent increase in Y0. One factor contributing to the heightened desired wage increase for public sector and rail workers is the cost of living crisis. The prices of essential commodities have been rising at a faster rate than wages, resulting in the decline of real wages and many struggling to keep up with rising costs. Rising inflation disproportionately affects lower-income households as a larger share of their budget is allocated to essentials such as food and energy, which are major drivers of UK inflation. As such, when prices for these essentials increase, due to having a low-income elasticity, consumers are forced to reduce their spending elsewhere. A reduction in spending is evident as of November 2023, British retail sales have dropped by 2.7 per cent since October 2022, reaching its lowest point since February 2021 (Romei and Stacey, 2023). Therefore, Y0 will increase as public sector and rail workers demand wages that align with inflation to mitigate their loss of spending power.
This is further compounded by the previous consecutive public sector pay freezes, coupled with the fact that wage growth in the private sector exceeded that of the public sector by more than double (Strauss, 2023). For example, nurses’ real-terms pay has fallen by 20% from 2010/2011 to 2022/2023 (Nuffield Trust, 2022). Similarly, rail workers’ wages were frozen during the COVID-19 pandemic. The decline in real wages was so significant that a wage increase of 10.6% would be necessary to offset the effects of inflation (RMT, 2023). This decline in real wages and the resulting decrease in living standards are major factors contributing to the increase of Y0 for both the rail and public sectors. This increase in Y0 compared to Yt, in turn, would then lead to an increase in the frequency and duration of strikes, denoted as Y(S).
The fall in public sector real wages has been exacerbated by a decade of consistent spending cuts in the government’s budget. As of November 2023, the Chancellor of the Exchequer has allocated £20 billion for tax cuts by deciding not to protect public services against the rising costs of inflation (Parker, 2023). The inadequate allocation of resources to the Health and Social Care budget has left the NHS £23.5 billion worse off since 2010 (PolicyMogul, 2019). Consequently, individuals in the public sector have witnessed a decline in real wages, primarily due to insufficient pay raises resulting from shortages in public sector spending. This will also drive up the value of Y0 as public sector employees will seek higher wages. Another factor that could potentially increase Y0 for both public and rail workers is the decoupling of wages from productivity seen in the UK. From 1981 to 2019, productivity increased by 87%, yet median employee wages have only increased by 62% (Teichgräber and Reenen, 2021). This can be attributed to labour market slack, globalisation, and the dilution of trade union power. This divergence contributes to lower median wages and explains why public sector workers are demanding higher wage increases.
The resulting decline in real wages has led to a higher value of Y0 compared to Yt, increasing the frequency and duration of strikes. Y* (the lowest conceivable wage increase the union will accept) may also increase as unions have become increasingly aggressive due to declining living standards. Increased trade union aggressiveness means it will take the unions longer to concede to the opponent’s proposals, decreasing the value of τ.
Consequently, Yt increases as the opponents become more desperate to reduce the length of the strike. For example, rail strikes ended after the rail companies increased their offer from 4% to 5%, and RMT accepted the offer (Brown, 2023). Similarly, the Teacher’s Union accepted an increased wage offer of 6.5% after the government offer was increased (Gov. UK, 2023).
However, the frequency and length of public sector strikes are likely to be longer than private sector strikes like rail. This is because, as mentioned previously, the government is constrained to a strict budget limit (low Yb) and so is less likely to increase Yt, whereas the rail firms have more room to increase Yt within their higher profit margins (high Yb) (RMT, 2023). Yt remains low compared to Y0, increasing the frequency and length of strikes. For example, public sector strikes among junior doctors are still ongoing (Sky, 2024). Thus, decreasing the value of τ is not guaranteed to increase Yt in the public sector context if there is genuinely no more budget (Yb) available. Moreover, the effect of decreasing τ on increasing Yt (the optimal wage increase for the government and rail companies) depends on the trade union’s strength in negotiating pay agreements, which will be discussed later in the article.
Secondly, we will focus on the recent decrease in Yt. Over the last decade, rising inflationary pressures and increased borrowing by the government have resulted in the substantial growth of the UK budget deficit. The rise in government expenses is apparent, with health, education and other public sectors collectively spending over £1.4 billion on electricity, gas, and oil from 2022 to 2023 (Office for National Statistics, 2022b). The reduction in funds available to spend on public sector wages can be represented by a fall in the value of Yb.
This will result in the government establishing a lower target wage increase (Yt) as it will likely allocate its scarce funds elsewhere. This is compounded by the UK government’s majority belief that offering higher public sector pay will contribute to rising inflation by injecting more money into the economy (Whiteley, 2023). The government’s reluctance to raise public sector wages is evident by its sustained spending cuts. Consequently, the value of real wage Yt decreased due to a decrease in Yb, resulting in the increased disparity between Y0 and Yt. Similarly, rail worker wages were frozen during the COVID-19 epidemic due to a reduction in Yt of rail companies because of reduced revenue during that period (RMT, 2023).
Additionally, the shortage of public sector workers can also result in an increased target wage increase by the government. Public sectors like healthcare, which demand skilled labour and have highly inelastic supply, experience negligible unemployment. From September to November 2022, the healthcare and social sectors saw 208,000 vacancies, surpassing those in any other industry (Francis-Devine and Buchanan, 2023). This means that now the government faces increased difficulty in finding replacements for striking workers. This will result in a lower value of τ as the lack of public workers during the strike means there will potentially be greater disruptions to the UK economy, reflecting a stronger strike attempt. The greater the participation, the stronger the strike attempt and the less likely unions will concede. This decreases the value of τ and consequently increases Yt. However, again, Yt is unlikely to increase in a public sector setting due to the small budget, so Yt again remains low, increasing the frequency and length of strikes.
However, this model can also explain why some concessions by the government and rail companies can be observed after months of striking from 2022 to 2023. Prolonged strikes and the resultant staff shortages in essential sectors within the economy have had adverse long-term economic effects, such as staff retention issues and decreased quality of care and services across the public sector (Staton, 2022). This is clear as the Chancellor of the Exchequer accepted that public sector strikes had been a factor in the UK economy’s stagnation (Strauss, 2022). This means that the government will likely increase Yt to minimise potential costs as the value of r is large. Thus, the government will gradually increase its target for wage increases, as a prolonged strike can have a significant adverse effect on society. For example, the Teacher’s Union accepted an increased wage offer of 6.5% after the government offer was increased (GOV.UK, 2023). Similarly, for rail companies, there were reportedly lost revenues of £20m-£25m a day per strike (Kelso, 2023). Although the government subsidised them, these losses can lead to a loss of confidence from both customers and shareholders, and the UK treasury may decide to stop subsidising so there are still costs incurred. Thus, rail companies also increased their offer from 4% to 5%, and RMT accepted the offer (Brown, 2023).
The extent to which r (cost) increases and τ (aggressiveness) decreases, and consequently Yt increases, is greatly affected by the strength of the trade unions themselves in negotiating workers’ pay demands. There has been a decline in trade union power within the UK, with participation falling from 32.4% to 22.3% (Clark, 2022). Contributing factors include the shift from manufacturing to services, globalisation and recent legal-political reforms (Holst, 2014). The UK government has also taken deliberate steps to restrain the power and influence of unions by encouraging the greater utilisation of atypical employment (Moen, 2017).
Permanent workers may be strategically pitted against temporary ones to discipline the workforce and subjugate collective bargaining to drive wages down (Holst, 2014). This can undermine the wage-setting power and legitimacy of trade unions, and likely impede their ability to negotiate wages with the government. This is evident as the Chair of the government’s Industrial Strategy Council stated that the decline of unionisation is likely to have exerted downward pressure on pay (Chu, 2018). Diminishing trade union power would contribute to a lower value of r since the costs incurred by the government from strikes are likely to be lower. This may also result in a higher value of τ as limited negotiating power means unions are more inclined to concede. Both of these factors lead to Yt being low, increasing the disparity between the values of Y0 and Yt. As indicated by the model, this is expected to result in the increased frequency and duration of strikes.
Conclusion
In conclusion, the recent surge in strikes within the UK economy, spanning various sectors such as healthcare, education, and rail, can be analysed using the Ashenfelter and Johnson model. The model provides valuable insights into the dynamics between unions and firms, shedding light on the factors influencing the frequency and duration of strikes.
Overall, in the current economic climate, factors such as the cost of living crisis, decoupling of wages from productivity, and government spending cuts have led to a significant decline in real wages for public sector workers and resulted in a dramatic increase in Y0. Coupled with a substantial budget deficit and austerity, the government’s ideal wage increase (Yt) has decreased and remained low. This increasing gap between the two wages has contributed to the increasing length and frequency of strikes.
This article was written by Isabella Parker and Anastasia Malikova, Economic Research Analysts in the Economic Research Division. This article was edited by Cai Hui Lien, Head of the Economic Research Division.
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