One problem for motorists at the moment is the cost of petrol, where prices have reached over 1.37p on average, as we considered in the blog It’s fuelling anger. However, another problem could soon materialise and that is no petrol. Back in 2000, there was massive disruption to the public with a fuel blockade and a similar thing could occur, following the ‘yes’ vote by fuel tank drivers in favour of strike action.
Over the past few years, strikes have occurred across a variety of industries and if this one did happen with no contingency plan in place, disruption would be significant to both private individuals and companies. Drivers from Unite (the trade union) supply over 90% of fuel to UK garages and so any strike could lead to the closure of up to 7,900 stations.
However, the government has begun to consider the worst case scenario, if talks do not work with plans to begin training army drivers. There are concerns that without these plans in place, disruption across the country may occur with supermarkets, garages and airports all facing fuel shortages. Those who have a job that relies on travel, or even those who simply use their cars or buses to get to work will also feel the effects. Other problems within the emergency services could also emerge, but the government has assured the public that their fuel would be prioritised. The following articles consider this issue.
Fuel strike drivers vote yes in row over conditions BBC News (26/3/12)
Plan for fuel strike, says Downing Street Financial Times, George Parker (27/3/12)
Talks urged to avert fuel tanker strike Independent, Andrew Woodcock and David Mercer (27/3/12)
Ed Miliband: Fuel strike must be avoided at all costs Telegraph, James Hall (27/3/12)
All striking tanker drivers want is responsible minimum standards Guardian, Len McCluskey (27/3/12)
- If a trade union bargains for higher wages, what is the likely effect on employment and unemployment?
- How might strike action by tankers affect businesses?
- Are there likely to be any adverse long term effects if strike action does occur over Easter?
- How could strike action affect a firm’s costs of production? Think in particular about those who rely on travel as part of the business.
- What other options are there to trade unions, besides striking? Assess the effectiveness of each of the options.
- If a shortage of petrol emerged, what would you expect to happen to its market price?
No, bonfire night hasn’t been moved, but the 30th November could certainly be a day to remember. This day has been ‘selected’ by Unions for a nationwide day of action in response to government plans to increase workers’ pension contribution. The action would undoubtedly lead to massive disruption to public services across the UK and if an agreement is not reached with Ministers, we are likely to see further days of industrial action. In the words of the TUC boss, Brendan Barber, if no agreement is forthcoming, there will be ‘the biggest trade union mobilisation for a generation’.
The so-called pensions crisis has been an ongoing saga with seemingly no end in sight. As the UK population gets older, the strain on the state pension will continue to grow. The dependency ratio has increased – there are more and more pensioners being supported by fewer and fewer adults of working age. If the level of benefits is to be maintained, workers must either work for longer or make larger contributions to make up the deficit.
Plans are already in motion to increase the retirement age, but this in itself will not be sufficient. If pension contributions do increase, workers will undoubtedly find themselves worse off – a larger proportion of their gross income will be taken and hence net incomes will be lower. With less disposable income, consumer expenditure will fall, and given that consumption is the largest component of aggregate demand, the economy will take a hit. This is even more of a concern given the pay freezes we have already seen, together with rising inflation. People’s purses will get squeezed more and more, So, while raising pension contributions may help plug the pensions deficit, it could spell trouble for the economic prospects of the UK economy.
In addition to the potential longer term effects, there will also be a significant short term effect, namely, the loss of output on the day of the strike action. If workers are absent, the company will produce less than their potential and in some cases, the lost output can never be regained. If the postal workers go on strike, businesses may find packages go undelivered, customers experience delays, bills are not paid and so on. In all, strike action on the scale that is planned will have an impact on everyone, so it is in the interests of the economy for some sort of agreement to be reached. As Mr. Barber said:
‘If there’s no progress, then potentially we will see very widespread industrial action across the public services’
The following articles look at this conflict.
Unions plan ‘day of action’ over pensions Financial Times, Brian Groom (14/9/11)
TUC: ‘Strikes will be the biggest for a generation’ says Brendan Barber Telegraph (14/9/11)
Unions call for ‘national day of action’ over pensions BBC News (14/9/11)
Unions call collective day of strike action in November Guardian, Helene Mulholland and Dan Milmo (14/9/11)
Ed Miliband to warn trade unions that they must modernise Independent, Andrew Grice (13/9/11)
Trade unions plan day of action over pensions on Nov 30 Associated Press (14/9/11)
Are the trade unions about to save Britain? Telegraph, Mary Riddell (12/9/11)
Pension row unions in day of action The Press Association (14/9/11)
Unions set date for pensions strike as ‘unprecedented ballot begins’ Telegraph, Christopher Hope (14/9/11)
TUC to attack ministers over public sector pensions BBC News(14/9.11)
Secret plan for union strikes to cripple the country Telegraph, Christopher Hope(14/9/11)
- What are the main costs of strike action to (a) the individual going on strike (b) the firms which lose their workers (c) small businesses (d) the economy?
- What is meant by the dependency ratio? What action could be taken to reduce it? For each type of action, think about the costs and benefits.
- If pension contributions do increase, explain how workers will be affected. How will this affect each of the components of aggregate demand?
- Based on your answer to the above questions, what is likely to be the impact on the government’s macroeconomic objectives?
- What other action, besides striking, could unions take? Is it likely to be as effective? Do you think strikes are a good thing?
- Illustrate on a diagram the effect of a trade union entering an industry. How does it normally affect equilibrium wages and employment?
The News is something that we probably take for granted. For many, it’s the first thing they switch on in the morning, or it’s something you listen to while you drive to work or before you go to bed. But, tomorrow and Saturday (5 and 6 Nov) could be a different story, as the BBC faces a 48-hour strike over pensions, which has been organised by the National Union of Journalists. Star presenters, including Fiona Bruce, are expected to participate in the walkout, which will lead to News Bulletins being hit, Newsnight facing disruption and certain radio programmes being cancelled. The Director General of the BBC made a last minute plea to those participating in the walk-out, as core news services across both TV and radio will suffer, as there simply aren’t sufficient resources to provide the necessary cover.
The strike follows significant changes to the BBC’s final salary pension scheme, in response to a growing pension deficit. The BBC plans to reduce the £1.5bn pension deficit by capping increases in pensionable pay at 1% from next April. Although some negotiations have already taken place, the NUJ claims that the BBC ‘has no appetite for negotiation’. After negotiations, employee contributions were reduced from 7% to 6% and a career average pension scheme would be introduced to replace the final salary pension scheme, which is very lucrative for the worker, but hugely expensive for the firm. Despite these changes, members of the NUJ still believe the proposals are fundamentally ‘unfair’.
This strike is unlikely to be the only disruption faced by the public, as further action is expected to occur throughout the rest of November and there are also concerns that Christmas broadcasts may face interruption. Those NUJ members taking part in the walk-out are expected to experience a significant loss in earnings, without there being any noticeable benefit in the long term. Although some will support the strike action, many will be unimpressed. As the Director General wrote in an email to all BBC staff:
“The public – many of whom are facing difficult employment and economic pressures – will find it very hard to understand why the BBC’s service to them should be impaired in this way”.
- What is the difference between a final salary pension scheme and a career average pension scheme? Which is more beneficial for a) the recipient of the pension and b) the pension provider?
- Is anyone likely to benefit from this 48-hour strike? (Think about who the BBC’s competitors are.)
- The BBC article says that ‘payments will increase automatically each year in line with inflation’. What does this mean? Are increases in payments that are indexed to inflation better than payments being indexed to earnings? Explain your answer.
- Apart from striking against changes to pensions, what are some of the other typical reasons for strike action?
- How effective are strikes likely to be? What are the key determinants of the success or failure of them?