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

Why the government is arguing against large wage increases – and why not everyone agrees.
RMT secretary-general Mick Lynch on the picket line
RMT secretary-general Mick Lynch on the picket line
Ming Yeung via Getty Images

The stalemate between railway employers and workers is set to continue into Christmas, with neither side willing to give in over their idea of how much 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 41-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 – plan to walk out of their jobs for another eight days over December.

Unless a settlement with rail employers can be reached over pay and working conditions, more strikes are expected in January.

There will also be an overtime ban across the railways from December 18 until January 2.

The union is calling for a pay rise to help with the cost of living crisis, meaning wages would increase by 11%.

How have employers – and the government – responded?

The Rail Delivery Group (owned by Network Rail) has offered a 4% rise in 2022 and 4% in 2023, and a guarantee of no compulsory redundancies before April 2024 – but it was rejected by RMT.

The employer have previously claimed railways may have been subsidised 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.

A RDG spokesperson said the organisation has been clear “we want to do a deal with the RMT” which delivers reforms, and “unlocks funds or an affordable pay rise” – but that they wanted to reach a deal to avert the Christmas strikes.

Current transport secretary Mark Harper said that the union’s rejection was “incredibly disappointing” and unfair to public, passengers and rail workers.

He said earlier this week there “simply isn’t the money” to meet the demands of workers, telling the BBC’s Sunday with Laura Kuenssberg: “I do not have a bottomless pit of taxpayers’ money to throw at this problem.”

Former transport secretary Grant Shapps also claimed earlier in the negotiations that because 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 historic inflation rate.
UK historic inflation rate.
PA Graphics via PA Graphics/Press Association Images

Inflation has reached a 41-year high at 11.1%, contributing to the already trying cost of living crisis which is driving rail workers to call for higher wages.

However, former chief secretary to the Treasury, Simon Clarke, said in the summer (when the strikes began) that workers must show “collective, society wide responsibility” to forestall the “evil of inflation”.

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

Indeed, if the 32.7 million workers currently in the UK received a pay rise to match 11.1% 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 Downing Street’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.

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

She explained 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 its 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 6.0% in April. This is almost half the current inflation rate of 11.1%.

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 labour market,” the head of the Institute for Employment Studies Tony Wilson told The Guardian.

He 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.”

He claimed that this wealth comes from depressing workers’ wages.

Meanwhile, Labour’s shadow cabinet minister Lisa Nandy said in November that pay rises are only “unaffordable because of 12 years of Tory government and 44 days in which Liz Truss and Kwasi Kwarteng crashed the economy”.

She added that the government ought to be “moving heaven and earth” to avert the strikes.

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