Poor working conditions and stagnant wages have led to an increase in strike activity.
Pavlo Buryi, associate professor of economics at Harrisburg University of Science and Technology, said people are facing financial strain and, during the pandemic, faced deteriorating working conditions that required long hours and often long stretches without time off.
“Workers are facing a rising cost of living, but their wages are staying the same,” he said. “Their livelihood is worse off.”
Buryi cited the recent freight railroad workers threat to strike.
“The railroad unions expressed attendance policies as one of the primary reasons for going on strike,”
he said. “The same is true for all essential workers,” he added citing the teacher union and advanced care facility worker strikes. “Starbucks employees recently unionized to get better wages too.”
The main complaint is the rising cost of food, gas, services, just about anything people need to buy, while wages are staying the same, Buryi said.
“Everything has gotten more expensive, while the stocks and bonds markets are falling,” Buryi said. “It is reflected in the retirement accounts of workers. Their quality of life has gotten worse, and prospects of potential retirement have been pushed back. These tendencies force people to demand higher wages, which in turn pushes up inflation.”
During COVID, he said, the supply chains and other economic activities were put under additional pressure, which in turn highlighted the poor working conditions of affected workers or even caused the conditions to deteriorate.
However, companies are facing similar increased costs and can’t readily afford to increase compensation, Buryi said.
“Companies have to minimize borrowing because it is expensive to do so now,” Buryi added.
In fact, he said, with the price of borrowing money increasing due to increasing interest rates, some companies will go out of business or be faced with reducing staff.
The Federal Reserve has raised interest rates to discourage spending and cool off inflation.
“However, higher interest rates also put recessionary pressure on the economy. In response to higher interest rates and higher cost of inputs associated with disrupted supply chains, businesses increase prices, lay workers off, keep wages low, and hold off on new capital investments—all to minimize borrowing and save on high-interest rates,” Buryi said.
Because of the higher costs, some businesses cannot make payments on their outstanding bills and are forced to go out of business, he said.
All of this further deepens the recessionary fears that, in turn, drive down stock markets. “At the same time, the inability of the Fed to control inflation suggests further growth in the interest rate, which pushes down the bond markets.”
Buryi said while these economic conditions are alarming, “a well-designed and coordinated public policy would be effective. The government policies around green energy and immigration would play a crucial role.”
He explained that initiatives such as these would create jobs and encourage demand. “Getting inflation under control will be crucial for returning the economy to a healthy state and resolving at least a portion of the underlying issues that caused the labor unions to go on strike,” he said.
“We need a policy change.”