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 — don’t forget to avoid the trains. Wednesday — try not to get sick.
Much has been said about who “wins the controversy” in this showdown between ministers and unions. The government wants to be seen as a firm but fair bulwark against the unreasonable wage demands of the union barons. Unions want to be seen as defenders of essential workers like nurses who deserve a pay rise after years of austerity. But it would be useful to stop thinking of it as a political argument to be won, and to start thinking of it as a set of social conflicts to be resolved.
Let’s put aside for a moment the question of who “deserves” a raise. The government has extensive data on particular positions that suffer from severe recruitment and retention problems. It is the labor market which makes its own impartial judgment on the fact that the remuneration and conditions of employment of these workers are not sufficient in the current economic context. Even if the strikes ceased, these problems would persist until wages or conditions improved relative to the overall labor market.
The UK has pay review bodies that aim to carry out these types of assessments, but the process is too slow to deal with rapid events. The NHS pay review body’s recommendations in July, for example, were based on evidence submitted between January and March. Inflation is higher and the labor market is tighter than expected at the time, according to Gemma Tetlow of the Institute for Government.
Rather than refusing to negotiate this year’s salary, the government could look to the private sector for examples of how to be more flexible. A popular strategy in UK companies is to make one-off payments to staff on top of or after a consolidated salary increase. According to Incomes Data Research, around one in five UK employers did so in 2022. Rolls-Royce, for example, paid a lump sum of £2,000 in cash to 11,000 blue-collar workers and 3,000 junior managers last summer. Although in principle the unions do not like lump sums rather than consolidated pay increases, they have shown “a willingness to think creatively about what members need to help with the cost of living. now,” says Kate Bell, deputy general secretary of the Trades Union. Congress.
One-off lump sums could also help ease government fears of fueling higher inflation (although I think the risk is remote given that public sector wage growth is so far behind that of the private sector). In Germany, the government has tried to coordinate smoothly with employers and unions to avoid the risk of a wage-price spiral. As part of this effort, it gave employers the option of paying a one-off bonus of up to €3,000 which would be exempt from income tax and social security contributions.
Sebastian Dullien, professor of economics at HTW Berlin – University of Applied Sciences, says this has helped unions agree to lower consolidated pay increases, as workers’ take-home pay would still get a nice boost. IG Metall, Germany’s largest influential union, in November reached a wage deal below inflation of 5.2% in 2023 and 3.3% in 2024, supplemented by the tax-free bonus. Economists at the time called it a “golden loop” deal that made a wage-price spiral less likely.
Dullien says Germany’s “more consensual approach” to industrial relations may not always be better when it comes to innovation, but it still comes in handy “when deciding who should bear the cost of a crisis or a shock”. The UK may not have the history or institutional framework of Germany, but it could always find a better solution, he added.
“If you only trade on one dimension, it’s very obvious who wins 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 parties can give in without losing. There are many other dimensions that the government and the unions could introduce into their negotiations, from training to pensions, which remain much more generous than in the private sector, and could perhaps be partly diverted towards better wages.
The UK government last week announced plans for a new law to ensure that a minimum level of public service is maintained during strikes. But you cannot legislate to improve labor relations. Its press release explains that the government “has a duty to the public to keep them safe, protect their access to vital public services and help them go about their daily business.” The best way to do this is to be an adult employer and negotiate a solution.
sarah.oconnor@ft.com
