St. Lawrence Seaway workers strike outside the St. Lambert Lock in St. Lambert, Que., on Oct. 23.Graham Hughes/The Canadian Press
David Jones is a policy analyst and economist. He is a fellow at the Canadian Centre for Health Economics and is studying public policy at the Munk School of Global Affairs & Public Policy, University of Toronto.
Crowds, flags, megaphones, a sea of placards: “Our wages need CPR!” Such has characterized a continuing 18-month wave of strike action across private and public sectors in North America.
On Sunday, a strike by 361 unionized workers shut down the St. Lawrence Seaway, which links many eastern ports to the Atlantic Ocean. That follows job actions by dock workers in British Columbia, federal public-service employees, American teachers and Greater Toronto Area grocery store workers.
South of the border, the recent walkout by 75,000 staff at Kaiser Permanente constitutes the largest health care strike in U.S. history. Around 40,000 members of United Auto Workers (UAW) have downed tools to seek higher wages, precipitating increasingly sweaty palms amongst execs at Ford, GM and Stellantis.
Are the strikes mostly behind us? Can anxious chief financial officers start to put away the chequebook? Not so fast.
Strikes can appear volatile and unpredictable. Herd mentality is an impulsive tide. The political arena is complex and dynamic. However, the recent strike wave can be explained as the combination of several economic and social dynamics.
First, supply-side inflation. The global economy experienced a “negative supply shock” because of higher energy and food costs, and supply chain bottlenecks – all of which drove up prices. Government fiscal stimuli and a post-COVID-19 demand surge also fuelled inflation, but rising costs were a significant driver.
Second, tight labour markets. In Canada, unemployment remains relatively low (5.5 per cent in September). With high vacancies and low unemployment, staff become increasingly irreplaceable, generating stronger bargaining power for the labour force.
Third, deterioration in working conditions. Workers are human; if they feel undervalued, they’ll push back. COVID-19 imposed health risks, depleted morale and induced burnout. Unsurprisingly, nurses in Ontario felt “disrespected and devalued” by the subsequent public-sector pay restraint. The recent commitment by federal, provincial and territorial health ministers to prioritize work force retention is a great step, but those words may be ringing hollow currently in Ontario.
Fourth, a sense of growing inequality. Millions of households face economic challenges from the rising cost of living. In that context, burgeoning remuneration for chief executive officers appears highly unjust. The Economic Policy Institute finds that, for the 350 largest U.S. firms, the CEO-to-typical-worker compensation ratio is 15 to 20 times higher now than it was in the mid-1960s. The recent UAW strike highlighted the 40-per-cent increase in CEO pay at these companies in recent years.
Joining the dots, these four factors have worked together to create an environment ripe for industrial action. Inflation creates the desire – the necessity even – to bargain for higher wages to preserve living standards. The tight labour market puts workers in a strong position. COVID-19, frustration and injustice provided the emotional fuel.
If inflation were driven by a booming economy, firms and governments could fund higher wages from growing revenues. But economic growth is currently stagnating, exacerbated by geopolitical uncertainty. If unemployment were higher – as per 1970s “stagflation” – then unions would have less bargaining power. But job vacancies in Canada reached a record high in 2022.
A downward spiral of staff exodus compounds matters. The more sectors that strike, the more publicly acceptable and politically feasible subsequent walkouts become. Arguably, North America has surpassed a “tipping point”: In 2023, we barely bat an eyelid when a new strike hits the media.
The macroeconomic tide may be turning, with falling inflation and rising unemployment set to radically diminish two of the key dynamics above. But that takes time, and we may yet see a final surge of pay demands in the coming months.
We should strive to avoid strikes where possible. Although they can offer opportunities to equalize earnings, strikes are often disruptive, and at worst, crippling to society. The public needs functioning hospitals, open schools and effective welfare services.
But the economic climate makes high wage demands a tall ask. Negative economic growth in late 2023 (if forecasts materialize) would reduce public- and private-sector revenues, leaving limited wiggle room for CFOs to meet rising pay demands.
Unfortunately, in the short-term, the risks of further action are very much with us.