(Bloomberg) -- From London to Berlin and Paris, a new era of agitation over the spoils of capitalism is revealing itself in piles of uncollected garbage, shuttered transit systems, and mass protests.
Rampant public-service strikes in Britain, Germany and France, which has also suffered eruptions of street chaos, may point to the most concerted fightback yet seen after decades when employees suffered declining proceeds from countries’ national incomes.
Incited by a once-in-a-generation cost-of-living crisis, the mood in the region’s major economies, among workers with the leverage to do so, is shifting toward confrontation to defend the value of current or future labor entitlements, against governments struggling with fraying public finances.
That manifests itself in wage demands enforced by targeting services for citizens, as seen in Britain’s health-system gridlock or Germany’s transport shutdowns, with the threat there of more travel disruption to come this summer. France is additionally enduring thronged resistance against attempts to raise the retirement age.
In every case, the fight centers on the hearts, minds and wallets of citizens in their roles as voters and taxpayers. It affects them as consumers too, since wage deals can stoke inflation — and any echoes of such fiscal fights spilling into private-sector bargaining at a time of labor shortages can add to that threat.
For Marcel Fratzscher, head of the Berlin-based German Institute for Economic Research and a former European Central Bank official, the shifting dynamics may augur years of charged disputes throughout the region’s economies.
“The times of an employer market in which employers could more or less dictate wages and working conditions seem to be over,” he said.
The backdrop to that change is twofold. Firstly, labor lost out to capital in recent decades with real wages increasingly squeezed in many countries since the 2008 financial crisis, fueling populism on both sides of the Atlantic.
Workers’ share of national output through compensation tumbled 7.6% in the US between 1980 and 2018, and slipped roughly 12% in Germany and France, analysis by the Resolution Foundation shows. The UK share held up better by only falling 2.6%, though some argue the underlying picture there is worse.
“There are a lot of reasons that are behind this decline: one of them is of course globalization, another is technological shift,” said Rosalia Vazquez-Alvarez, a wage specialist at the International Labour Organization in Geneva. “Clearly the bargaining power of workers has also declined.”
Secondly, the most recent catalyst toward agitation has been double-digit inflation in both the UK and across the euro region. Emboldening confrontation, fewer workers driven by shifting demographics have tightened employment markets, amplified in Britain by its exit from the European Union, which cut off a supply of cheap labor.
“Demand is still high and the talent shortage is still quite extreme,” said Chris Gray, director at recruitment giant Manpower UK.
It’s no surprise that the backlash is most focused on public services, since they agglomerate squeezed lower-paid employees performing pivotal functions who tend to be more unionized than in the private sector, and can take on every country’s deepest pockets: the government.
Greg Thwaites, research director at the Resolution Foundation, reckons that even if that were to repeat itself in wage talks at companies, the outcome may still not mean workers get a bigger share of the pie.
“Firms often just respond with higher prices,” he said, speaking on the UK in particular. “I don’t expect labor-market tightness to have much of an effect on the labor share. It hasn’t much over the past.”
In France, President Emmanuel Macron has attempted to address the labor-share matter head-on in a bid to defuse anger over his move to raise the pension age by decree. He is working on ways to force companies carrying out share buybacks to distribute more of heir profits to workers.
That might turn out futile however: Statistics on a previous such measure now show it turned into a boon for business, while still keeping pay raises in check.
What’s clear is that the fight for a greater share of income in major European economies is gaining momentum at present. Union membership is growing in the UK and in striking sectors in Germany, where the portion of workers enrolled in a union had shrunk to 16% before the pandemic from 30% at the turn of the century.
Public support seems to be amenable too, driven by widespread voter concerns over economic inequality.
Even in the UK, a country where skepticism toward unions is historically greater, a February Ipsos poll found a majority of voters were supportive of strike action. Public sympathy for strikers there ranges from 63% in support of nurses to 36% and 30% for train drivers and barristers respectively, according to YouGov.
While Germany was brought to a standstill by travel strikes last Monday, a majority of voters polled expressed some sympathy.
That country’s transport standoff is likely to continue to showcase one of many fronts in the fight between labor and capital.
Aviation is one part of that. Deutsche Lufthansa AG, Europe’s biggest airline, already saw disruption last year, and a walkout of airport staff led to 1,300 canceled flights in February. With a no-strike deal with pilots running out in June, it faces the specter of more trouble during its busy summer travel season.
Meanwhile the one-day train standstill that German railroad workers’ union EVG recently co-orchestrated was its response to a push for higher productivity.
Labor representatives counter that many managers trying to achieve that are non-specialized in railway services and out of touch with the needs of workers who barely can make a living.
“Our colleagues are now much more confident in standing up for their demands,” the union said in a statement, observing that more of its are members willing to take part in negotiations. “The worker’s movement is regaining strength.”
--With assistance from William Horobin, Alexander Weber, Zoe Schneeweiss and Andrew Atkinson.
©2023 Bloomberg L.P.
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