What Does Inflation Have To Do With Rail Workers’ Salaries?

The stalemate between railway employers and workers continues this week, with neither side willing to give in over their idea of ​​how many people should be paid.

One of the primary arguments against increasing wages for striking rail workers is that it will lead to inflation, which is already at a 40-year high. But will it really?

Here’s what you need to know.

What are rail workers asking for?

Around 40,000 workers – signallers, maintenance and train staff working for Network Rail and 13 train operators – walked out of their jobs on Tuesday and Thursday this week, triggering the largest strike in more than 30 years.

Unless an 11th-hour settlement can be reached over pay and working conditions, another strike is expected on Saturday.

The union is calling for a pay rise to help with the cost of living crisis, meaning wages would increase by 7%.

How have employers – and the government – ​​responded?

Network Rail has offered a 2% rise with a further 1% linked to job cuts, which RMT (the Union leading the strikes) has rejected.

The employer claims railways may have been subsidized with £16 billion during the pandemic by the government, but the whole network has an annual running cost of £20 billion. With income from fares reaching just £4billion, it claims it is not possible to engage with strikers’ demands.

Transport secretary Grant Shapps also said a median train-driver salary of £59,000 means it is not right to increase wages.

However, RMT say the true median salary for its members is £33,000 as train drivers are not part of the dispute.

Why are the strikes anything to do with inflation?

UK historical inflation rate
UK historical inflation rate

PA Graphics Press Association Images

Inflation has reached a 40-year high at 9.1%, contributing to the already trying cost of living crisis which is driving rail workers to call for higher wages.

Inflation rates have already exceeded the forecasts from May, and are expected to exceed 11% by October.

However, the chief secretary to the Treasury, Simon Clarke, said that workers must show “collective, society wide responsibility” to forestry the “evil of inflation”.

The government is using the threat of a wage-price spiral – as seen during the 1970s – to suggest that raising wages would lead to double-digit inflation.

Indeed, if the 32.7million workers currently in the UK received a pay rise to match 9% inflation rate, employers and government wouldn’t be able to cope.

As the theory goes, higher wages will lead to higher costs for the consumer, triggering more inflation.

But is the government right?

Not everyone believes the government’s argument.

Economist and commentator Grace Blakeley told ITV’s Good Morning Britain that, since the financial crisis of 2008, there was wage stagnation and so calling for an increase now is fair.

What they [the strikers] are asking for is just the maintenance of their wages relative to prices in the economy,” she explained.

She said this money should come from the profits of the company, rather than out of the economy.

“Now, we can grant that without triggering a wage/price spiral if you account for the fact that when you’re increasing wages, you then take some money off the top in terms of profit.

“You keep the amount of money, demand on the economy the same, but you’re taking money away from executives and shareholders rather than working people who actually can’t afford to survive.

“There’s now evidence that it’s profits which are disproportionately driving inflation, rather than wages.”

The Office for National Statistics (ONS) has also suggested that without bonuses, average pay growth is 4.2% in April. This is less than half the current inflation rate of 9.1%.

Only bonuses help close the distance between wages and inflation, and that’s not an option available to every profession, particularly in the public sector.

“There is little sign so far of a wage/price spiral, but some indications that private-sector services are raising pay in response to a tighter labor market,” the head of the Institute for Employment Studies Tony Wilson told The Guardian.

I have suggested the key was to encourage those who had quit work to rejoin, rather than increasing higher rates.

RMT chief Mick Lynch also told Channel 5 News that it’s the prices which are causing demands for higher wages, which have been stagnant for years.

“Some people haven’t had a rise, not for 10 years since Cameron and Osbourne,” he alleged.

He also claimed the government was working to “suppress” wages too, but it was time to “rebalance things” between the billionaires who are profiting and the ordinary workers.

Lynch also highlighted the inequalities in pay within his industry, alleging the chief of Network Rail is on £600,000 salary.

“The railways made £500 million of profit last year, when fares and passengers were at an all-time low.

“People are stripping money out of the railway, they’re stripping money out of the economy. And if workers’ wages don’t go up, it means a transfer of wealth from the poor to the rich.

“We’ve got more billionaires than we’ve ever had in this country.”

I have claimed that this wealth comes from depressing workers’ wages.

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