David Prosser: Strikes could jeopardise more jobs

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The Independent Online

Outlook Suddenly, the good news is coming thick and fast. Earlier this week we had benign inflation numbers that leave the Bank of England plenty of room to pursue its quantitative easing policy further and yesterday's unemployment data were better too. Next week we will get the eagerly awaited third-quarter GDP data, which may signal a formal end to the recession.

Even if next week's GDP figure doesn't quite make it into positive territory, there is no doubt that, so far at least, joblessness seems to be rising much more slowly than anyone expected. Youth unemployment even managed to stay below 1 million, confounding the Conservatives who had hoped to attack the Government with a campaign about the number of young people out of work as the landmark was passed.

The chief explanation for the better-than-expected news on jobs is that the labour market has proved flexible during this downturn. Employers and employees have gone to unusual lengths to avoid job cuts, or at least to minimise total numbers of redundancies.

There has been a move to short-time working, job-sharing and sabbaticals, but above all pay restraint has enabled private sector employers to maintain headcount numbers. The data published alongside the unemployment statistics yesterday revealed that earnings in the private sector are currently rising at an annualised rate of just 1.5 per cent. That's an all-time low, and just a third of the 4.5 per cent at which the Bank of England thinks earnings can grow without jeopardising its inflation targets.

Those figures are in line with more anecdotal evidence such as a survey from the EEF, the manufacturing organisation, which says four in five manufacturers have agreed pay freezes with staff this year. Indeed, outside of the public sector, it is tough to find employers that have agreed salary rises this year, one reason why both main political parties feel able to attack the pay of State-employed workers to a greater or lesser extent.

Pay freezes and other deals with staff are not always enough to prevent job losses, but in many cases they will have bought employers some time. If trading picks up relatively quickly, such measures may help them avoid cuts altogether.

Avoiding job cuts is not an entirely altruistic objective, by the way. Employers don't like the short-term costs of making redundancies and history shows that headcount reductions often come back to haunt them. Following the recession of the early-Nineties, many businesses found themselves left behind when the recovery arrived because they did not have enough skilled labour to take advantage of the pick-up.

Coming to an agreement with your staff over pay and other cost-cutting initiatives that fall short of outright job losses is, in other words, in everyone's interest. No doubt there will be plenty more of these agreements, but there is one thing that could jeopardise our new-found consensus between workers and the management class: a significant increase in the number of industrial disputes.

Worryingly, there is some evidence that this is beginning to happen. Royal Mail workers are on the verge of a strike, while British Airways was locked in talks yesterday with its staff over potential action. London Underground workers are also threatening to walk out, while the Leeds dispute with binmen is continuing. The list goes on.

We should be cautious. Any suggestion that we're heading for another Winter of Discontent would be hyperbole – after all, the statistics on the number of days lost to strike action in this country remain at pretty much an all-time low.

Still, even the perception that workers' representatives are becoming more militant might be enough to spook some employers, putting them off exploring the kind of deals that have until now prevented unemployment rising much more quickly. Trades unions, naturally enough, do not want employers to use the recession as an excuse to walk all over their staff, but there is a delicate line to tread.