24 August 2023

How much do strikes really cost?


Partisans of both sides tend to talk up the impact of strikes. Unions and their supporters want to emphasise how much employers and the public are losing out by not settling on their terms; critics point to the damage allegedly caused to the economy by irresponsible industrial action.

But how much do strikes really cost? It’s a difficult question. There is only a limited and out-of-date academic literature on the topic – perhaps not surprising, given the reduced salience of the topic since the 1980s. Here I simply sketch some observations and make very rough-and-ready suggestions about orders of magnitude.

In the year to June, we lost around 4m working days as a result of strikes. This is a big number, and it’s the highest for many years, but it’s only a fraction of the 29m days lost (in a smaller workforce) back in 1979. Or, to link it to another current problem, it’s just over 2% of the 185m working days lost to sickness absence in 2022.

Working days lost normally (but not always) mean a loss of pay to the strikers. Most modern strikes, however are one or two day withdrawals of labour, repeatedly or intermittently, rather than the many-week slogathons of the past. Costs to strikers themselves are kept to a minimum by being spread over an extended period.

It’s customary to focus on the first-order economic effects of strikes in terms of reduced output. This can be measured by the pay which workers lose plus the other factors of production which are lost when work is stopped.

If we assume (these are reasonable assumptions, which I can justify) that workers are paid around £100 a day on average the value of the direct loss of output resulting from strike action is going to be about £800m in a full year (assuming strikes continue at this pace). Again a big number in some contexts, but arguably relatively insignificant in an economy with a GDP in excess of £2.2trn last year.

However there are also considerable knock-on impacts. If trains are not running, for example, many people may not be able to get to work, or may have to incur extra costs such as taxis. Perhaps counter-intuitively, extra taxi rides increase GDP and partially offset the loss of rail output. However time delays also have a cost in lost output, which can in principle be quantified, although this is fiddly to do.

The effects of train strikes may nowadays be mitigated by our new-found ability to work effectively from home, but not everybody can do this. About 13% of those who normally travel to work by train, and are unable to work at home, (questioned in July-October 2022) reported being unable to work at all.

As a proportion of all workers, this is small, perhaps less than 2%, but might still mean a loss of output of £120m or so per strike day. In total, the year from June 22 embraced 25 strike days from three different unions. Not all led to complete closures, but the total cost in lost output by non-rail workers prevented from working could be of the order of £2bn in a full year.

The rail strikes may also have damaged activities which depend on transport into our cities. Examples include retail, entertainment, hotels and restaurants around city centres, particularly in London. At the time of the June 2022 rail and underground strikes, the hospitality industry estimated that they would cost its members over half a billion pounds in lost business that week. In June this year, the claim was that the UK hospitality business had lost £3.25bn from strikes over the previous 12 months. These claims are almost certainly exaggerating the effects on the economy as a whole, a cri de coeur from a sector already battered by repeated lockdowns.

There would definitely have been losses as a result of lower attendance at unrepeatable events such as sports fixtures and concerts. But some spending would simply be rearranged in time, with planned visits to London’s hotels and theatres simply shifted to strike-free weeks, which would then experience an increase over their expected revenue. There is some evidence that a similar sort of time-shifting effect occurs when there is an additional bank holiday (for instance, that for the late Queen’s platinum jubilee).

There are other types of rearranged consumption which offsets some output losses. Retail spending may be diverted from city centres to out-of-town venues, or to online purchases. Similarly suburban restaurants, bars and cinemas may gain at the expense of the capital in strike weeks. Such shifts occur all the time for non-strike reasons, such as the weather.

So over the whole year, while the losses to individual businesses in London and some other big cities may indeed have been very significant, the overall net loss of output to the economy might be more modest, perhaps £1-2bn for the year as a whole.

Mention of geographical relocation of activity should remind us that strikes can vary considerably in impact around the country. For example, in London well over half of all journeys to work take place via train, underground or bus, with only 28% by car. In Wales, just over 6% of travel to work is by bus or rail (no underground, of course), while 82% drive. Thus a national rail strike has a big effect on London, but a far smaller effect elsewhere.

Some national strikes have a more equal impact around the country – the schools strikes, for example. Faced with the closure of schools, many parents will have to take time off work. There are around 6.5m working parents in the UK. According to an ONS survey, 31% of parents questioned said they would have to work fewer hours, and 28% reported that they would not be able to work at all. This may be an exaggeration: when people are faced with an actual rather than a theoretical strike they may find they can make arrangements with friends or relatives. But even if we assume just half of those who say they would have to stay at home actually do so, the cost in lost output from a day off work would total in excess of £180m. Teachers have been on strike at varying times in the different UK nations, but if we assume an average of six days of school strikes during a year, the costs of parents’ lost working time would be just over £1bn.

One of the most problematic areas to assess knock-on effects is also one of the most controversial – the various disputes in the National Health Service. The ONS examined the effects of the total of 16 days of strike action during last December and January and February this year. Output was certainly cut: apparently ‘at least’ 93,022 outpatient appointments, 18,716 elective procedures, 27,957 community service appointments and 9,634 mental health and learning disability appointments had to be rescheduled. These were the service losses corresponding to the loss of output measured by the value of days of strike action. But these delays in treatment will have implications for patients. Some may not be able to return to work as they could have done, meaning further losses of output – and probably some premature deaths as well as the subjective ‘cost’ of delay in terms of pain, distress and apprehension.

Delays might have been greater if the NHS had not hired extra doctors and nurses to cover for striking staff. The NHS’s Chief Financial Officer has said that the cost of April’s five-day junior doctors’ strike included £100m spent on paying more senior staff at premium rates to cover for junior colleagues. Again, however, despite the costs to the NHS of these extra payments they actually add to GDP, offsetting the loss of output from the strikers.

The conclusions I draw from this brief survey are, first, that the costs of strike action to the economy are not easy to define, as in some cases consumers switch spending in the face of strikes, so that the loss to one organisation or business may be offset by a gain to another. Second, however, that there are inevitably knock-on effects as strikes prevent individuals in other parts of the economy from working, or force them to incur extra costs. Third, it is clear that the total cost of strikes is a multiple of the direct costs in lost output from strikers. Fourth, that the cost of strikes in key areas such as transport, education and healthcare is borne largely by the general public.

One of the few published estimates of the impact of the strikes on GDP, by the Centre for Economics and Business Research, was £1.4bn for the period between June 2022 and the end of April. For a full year it would be a bit higher, though the rough calculations here (plus other possible calculations such as the knock-on effects of the Royal Mail dispute and delays caused by civil service and other public sector strikes) suggest that the cost estimate from the CEBR is on the low side. I’d be inclined to suggest an annual figure around £5bn.

This is still relatively low. But bear in mind that, with most of the recent strikes being in the public or quasi-public sector where consumers face little choice, the effectiveness of strike action from the union perspective is not gauged by damage to the profitability of greedy shareholders in capitalist firms, but by whether the strike will sufficiently hurt the ordinary citizen to such an extent that the government will cave in to union demands. This, rather than the exact GDP cost, is the real issue which should worry us.

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Professor Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.