What are the real costs of the recent strike wave?
Both sides tend to exaggerate the costs these strikes impose. Unions and their supporters want to emphasise how much employers and the public are losing out by not agreeing to their demands: critics point to the damage allegedly caused to the economy by irresponsible industrial action.
Sorting out the real costs is a difficult question. There is only a limited and out-of-date academic literature on the topic – perhaps not surprising, given the reduced salience of the topic since the 1980s. Here I simply offer some observations about some results of the strikes, and make very rough-and-ready suggestions about orders of magnitude.
In the year from June 2022, we lost around 4 million working days as a result of strikes. This is a big number, and it’s the highest for many years, but it’s only a fraction of the 29 million days lost (in a smaller workforce) back in 1979. Or, to link it to another current problem, it’s just over 2% of the 185 million working days lost to sickness absence in 2022.
Working days lost normally – but not always – mean a loss of pay to the strikers. Most modern strikes, however, are one or two day withdrawals of labour, repeated at irregular intervals. They are not like the many-week slogathons of the past, such as the 1984-85 miners’ strike. Costs to strikers themselves are now minimised by being spread over an extended period.
It’s customary to focus on the first-order economic effects of strikes in terms of reduced output. Economists measure this by the pay which workers lose plus the returns to other factors of production which are lost when work is stopped.
We could spend a lot of time quibbling over the details. But if we assume, on reasonable grounds, that workers are paid around £100 a working day on average, and that labour costs are around half of total GDP, the value of the direct loss of output resulting from strike action is going to be about £800 million in a full year. It could be a bit higher, it could be a bit lower, depending on which workers are on strike. Again, a big number in some contexts, but arguably relatively insignificant in an economy generating in excess of £2.2 trillion last year.
However, there are also considerable knock-on impacts. If trains are not running, for example, many people may not be able to get to work, or may have to incur extra costs such as taxis. Perhaps paradoxically, extra taxi rides increase GDP and partially offset the loss of rail output. However, time delays also have a cost in lost output which can in principle be quantified, though the assumptions necessary to get a handle on this are fiddly. A back-of-the-envelope estimate: if one million people lost half an hour’s work on the 25 rail strike days in the year to June 2023, this would have a cost of around £200 million.
The effects of train strikes are nowadays strongly mitigated by our new-found ability to work effectively from home. Not everybody can do this, however. About 13% of those who normally travel to work by train, and are unable to work at home (questioned in July-October 2022), reported being unable to work at all.
As a proportion of all workers, this would be small, perhaps less than 2%, but this could still mean a loss of output of £120 million or so per strike day. The total cost in lost output by non-rail workers prevented from working could be of the order of £2 billion over the full year to June.
The rail strikes may also have damaged activities which depend on transport into our cities. Examples include retail, entertainment, hotels and restaurants around city centres, particularly in London. At the time of the June 2022 rail and underground strikes, the hospitality industry estimated that they would cost its members over half a billion pounds in lost business that week.
In June this year, the claim was now that the UK hospitality business had lost £3.25 billion from strikes over the previous twelve months. This sector has certainly had a hard time, both during lockdown and during transport strikes, but these claims almost certainly exaggerate the effects on the economy as a whole.
There would definitely have been losses as a result of lower attendance at unrepeatable events such as sports fixtures and concerts. But some spending would have been rearranged in time, with planned visits to London’s hotels and theatres simply shifted to strike-free weeks which would then have experienced an increase over their expected revenue. There is some evidence that a similar sort of time-shifting effect occurs when there is an additional bank holiday (for instance, that for the late Queen’s platinum jubilee).
There are other types of rearranged consumption which would offset some output losses. Retail spending may be diverted from city centres to out-of-town venues, or to online purchases. Similarly, suburban restaurants, bars and cinemas may have gained at the expense of the capital in strike weeks. Such shifts occur all the time for non-strike reasons, such as the weather.
So over the whole year, while the losses to some consumer-facing businesses in London and some other big cities may indeed have been very significant, the overall net loss of output to the economy over the year were probably more modest, perhaps £1-2 billion.
Mention of geographical relocation of activity should remind us that strikes can vary considerably in impact around the country. For example, in London well over half of all journeys to work take place via train, underground or bus, with only 28% by car. In Wales, just over 6% of travel to work is by bus or rail (no underground, of course), while 82% drive. Thus a national rail strike has a big effect on London, but a far smaller effect elsewhere.
Some national strikes will have had a more equal impact around the country – the schools strikes, for example. Faced with the closure of schools, many parents will have had to take time off work. There are around 6.5 million working parents in the UK. According to an ONS survey, 31% of parents questioned said they would have to work fewer hours, and 28% reported that they would not be able to work at all.
This may be an exaggeration: when people are faced with an actual rather than a theoretical strike, they may find they can make arrangements with friends or relatives. But even if we assume just half of those who say they would have to stay at home actually do so, the cost in lost output from a day off work would total in excess of £180 million. Teachers have been on strike at varying times in the different UK nations, but if we assume an average of six days of school strikes during the year under consideration, the costs of parents’ lost working time would be just over £1 billion.
One of the most problematic areas to assess knock-on effects is also one of the most controversial – the various disputes in the National Health Service. The ONS also examined the effects of the total of 16 days of strike action during last December and January and February this year. Output was certainly cut: apparently ‘at least’ 93,022 outpatient appointments, 18,716 elective procedures, 27,957 community service appointments and 9,634 mental health and learning disability appointments had to be rescheduled. These were the service losses corresponding to the loss of output measured by the value of days of strike action. But these delays in treatment will have implications for patients. Some may not have been able to return to work as rapidly as they could have done, meaning further losses of output – and probably some premature deaths as well as the subjective costs of delay in terms of pain, distress and apprehension.
Delays might have been greater if the NHS had not hired extra doctors and nurses to cover for striking staff. The NHS’s Chief Financial Officer has said that the cost of April’s 5-day junior doctors’ strike included £100 million spent on paying more senior staff at premium rates to cover for junior colleagues. Again, however, despite the costs to the NHS of these extra payments, they actually added to GDP, partially offsetting the loss of output from the strikers.
The conclusions I draw from this brief survey are, first, that the costs of strike action to the economy are not easy to define, as in some cases consumers switch spending in the face of strikes so that the loss to one organisation or business may be offset by a gain to another. Second, however, that there are inevitably knock-on effects as strikes prevent individuals in other parts of the economy from working, or force them to incur extra costs. Third, it is clear that the total cost of strikes is a multiple of the direct costs in lost output from strikers. Fourth, that the cost of strikes in key areas such as transport, education and healthcare is borne largely by businesses which are not party to the disputes, and to the general public.
One of the few published estimates of the impact of the strikes on GDP, by the Centre for Economics and Business Research, predicted direct costs of £1.2 billion for the year to June 2023. The rough calculations sketched here (plus other possible calculations such as the knock-on effects of the Royal Mail dispute and delays caused by civil service and other public sector strikes) suggest a rather higher figure. I’d be inclined to suggest an annual figure of at least £5 billion.
This is still relatively low, though note that it doesn’t take account of longer-term effects of regular strike action in terms of discouraging investment, or deterring management from pushing necessary productivity-enhancing changes to work organisation.
But bear in mind that, with most of the recent strikes being in the public or quasi-public sector where consumers face little choice, the effectiveness of strike action from the union perspective is not gauged by damage to the profitability of greedy shareholders in capitalist firms but by whether the strike will sufficiently hurt the ordinary citizen to such an extent that the government will cave in to union demands. This, rather than the exact cost in lost GDP, is perhaps the real issue which should worry us.
A version of this article was first published on CapX .