The new power of workers - a financial risk for each individual

The scent of the 1970s is in the air: After inflation, labor disputes are back. But unlike then, it is no longer the large industrial unions that are in the front row, but their sisters from the service and divisional sectors.

Strikes seem to have become more political and workers' fighting power greater. The response from politics and business will therefore have to be different than it was then.

In the early 1970s, the oil price explosion created a wave of inflation that built up into a tsunami due to the price-wage-price spiral. The industrial unions in particular pushed ahead with the fight against real wage losses due to inflation, even if the public sector was no slouch.

It was about economic interests. The Marxist-inspired student movement failed to engage the workers in their "struggle against capitalism." The workers' wage struggle was successful. In Germany, which is well organized in trade unions, real wage growth averaged around three percent between 1965 and 1985; in the less unionized US, at least a black zero came out.

But the price has been a staggering rise in the unemployment rate: from 4 percent in the US in 1965 to 11 percent in 1983; in Germany from less than one percent in 1965 to over nine percent in 1985. The main reason for this was that with stable or rising real wages in a difficult economic environment, the number of employees could not keep up with the growing number of people in work.

Today, labor disputes are being waged primarily in the service sector, particularly in the public sector, where the job risk is low. And the trade unions are more political: in Germany, local public transport workers are on strike with the climate protectors from Fridays for Future; in France there is a strike against the government's pension policy.

The age-related decline in the labor force gives workers more power because they have less fear of losing their jobs. Above all, the representatives of the public sector are only partially prepared to defend themselves against the onslaught, since they can easily come to an agreement with their employees at the expense of the tax and levy payers.

The result: more strikes, more strain on public finances, inflationary pressures from rising wages. An end to this development through higher unemployment as in the 1970s is not in sight due to the shrinking working population.

In order to break the new wage-price-government deficit spiral, the productivity of work in the service sector must be increased. This requires investments in the digitization of work processes and the qualification of employees.

Because when work becomes scarce, it has to be replaced by more physical and human capital. At the same time, the position of public employers must be strengthened so that the interests of taxpayers are better protected and politics cannot be blackmailed by organized interest groups.

An important step in this direction would be to limit the right to strike where public services are essential for the functioning of economic and social life. Because the right to strike should compensate for the weakness of the workers, but not create the potential for blackmail.

Thomas Mayer is founding director of the Flossbach von Storch Research Institute.

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