WAGES: the UK faces a ‘summer of discontent’ as labor strikes build after nationwide rail strikes. This is worsened by wage growth lagging well behind 9% inflation. The UK may be the global ‘stagflation’ poster child but the US and Continent are not far behind. Large US work stoppages are up 30% vs last year. But this discontent is still a small fraction of the 1970s (see chart) and likely shorter-lived. Central Banks on the front foot, long-term inflation expectations well anchored, labor markets set to cool. But the workforce has changed, driving investment opportunities.
STRIKES: Spare a thought for the 1970s when labor stoppages were 20 times recent US and UK levels. This decline now reflects a fall in union membership, to 10% in the US and 23% in the UK, now focused 4:1 on the public sector. Also the rise of more flexible work arrangements. For example, 27% of UK workers are now temporary, 13% self-employed, and 6% with second jobs. Plus the higher-for-longer inflation of the 1970s was more chronic and entrenched than conditions today.
IMPLICATIONS: But work has changed, and this has been accelerated by the recent pandemic. We have seen structural shifts to remote work, driving cloud, video conferencing, and employee integration solutions demand. See @RemoteWork. Also, new business models have emerged alongside the rise of freelancing, from ridesharing to delivery. See @GigEconomy. Meanwhile poorer demographics and rising wages have been a structural boost to automation and robotics. See @5GRevolution This has all helped support corporate profit margins near historic records.
