The labor market is in a “worse state than it was in the 1970s”, with massive rail strikes in the UK setting the stage for what will follow, according to Nobel Prize-winning economist Christoforos Pissaridis.
The British Railways Union RMT Union confirmed yesterday that it was going on strike this week, after no agreement was reached in discussions with companies about jobs, wages and conditions. As a result, about 80% of the routes have been canceled, while further strikes are planned during the month and in July.
For his part, speaking to CNBC, LSE professor Christoforos Pissaridis argued that labor markets are going through “one of the most difficult times” he has ever seen.
“It’s even worse since the 1970s, in the sense that we need to make more adjustments to labor markets. We have new technologies that bring automation, and in fact, union leaders are complaining about job losses, about ticket offices. “These are due to new technologies,” he said.
Even more, economies around the world are facing ever-increasing inflation, especially in food and energy, which is largely due to the war in Ukraine.
Pissaridis, who won the Nobel Prize in Economics for his work in labor market analysis, told CNBC that “there is no way we can avoid the pain of it all,” but said it should be distributed proportionately throughout the economy.
“There are not many sectors of the economy with strong unions. We do not have large nationalized industries like we had in the 1970s, when the whole manufacturing industry was on strike, so it makes it very difficult to say that ‘Those of you with strong unions will be compensated.’ fully for these external shocks and let the others lift the weight completely “, explained Chr. Pissaridis.
Regarding rapid inflation, Mr. Pissaridis stressed that a key concern is the “secondary effect” it will have, that is, that inflation expectations are unhooked and lead to wage increases, thus forming a “self-fulfilling prophecy” and an upward spiral.
“The spiral has not yet appeared, but wage growth in the amount of inflation forecast by the Bank of England or close to these levels, will lead us very close to a spiral and we can see it, and if that happens then it will “It will take much longer to get rid of inflation,” he told CNBC.
Concluding, Mr. Pissaridis reminded that “in the 70’s it took at least 10 years to control inflation and it was something very hard in the end, it was Thatcher’s policy that caused so much unemployment only by fighting inflation. This is definitely not something which we want to see this time, because we hope we have learned our lesson “.
Source: Capital
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