How inflation is fueling a nationwide labor movement

Labor initiatives are surging throughout the U.S. economy, driven by a higher cost of living that’s proving resistant to interest rate hikes by the Federal Reserve. Inflation numbers for August came in hotter than expected this week despite falling gas prices. Core inflation climbed 0.6 percent on the month, doubling what economists anticipated. 

Both Republicans and Democrats have bemoaned the fact that persistently high inflation eats into paychecks and effectively decreases wages, which have barely seen an increase in 40 years.  

From 1979 to just before the pandemic in 2019, inflation-adjusted median hourly wages increased by about 5 percent or 0.2 percent annually, according to the Labor Department. Inflation during that period has remained low, only once rising above 5 percent for the year.  

But since the coronavirus pandemic began in 2020, inflation has soared, making decades of wage stagnation all the more painful for workers and consumers. 

The squeeze on Americans has spurred labor initiatives across the U.S. economy. Here’s a look at what they are. 

Widespread unionization

Unions are popping up all over the place, both in major companies and in smaller and medium-sized businesses. Corporations including Amazon, Starbucks, Chipotle, Apple and Trader Joe’s have all seen unions form over the past several months. Even minor league baseball this week formed a union that received a tweet of praise from President Biden. 

Perhaps most notable among these is the unionization effort within fast food, a sector that employs millions of Americans and saw its first union form only last year at a West Coast burger chain called Burgerville, according to industry consulting group Synergy Restaurant Consultants. 

Union organizing efforts were reported at Starbucks around the same time, with stores in the Buffalo. N.Y., area unionizing at the end of last year, according to Synergy. 

“If workers at more Starbucks locations and other national chains successfully unionize, restaurant owners may need to consider a future with unions in it,” the company wrote, adding that “the industry landscape may be changing.” 

Americans’ attitudes toward unions are also changing. Seventy-one percent of Americans now approve of labor unions, the highest number since 1965, according to an August Gallup poll. 

The threat and reality of strikes

More than 115,000 U.S. railroad workers will be allowed to start striking on Friday — a move that could impede commercial activity across the U.S. economy. 

Workers have been negotiating with railroads for a pay increase, bonuses and back pay, but the two most important railroad unions have hit an impasse in negotiations that have lawmakers worried.

On Wednesday, the International Association of Machinists and Aerospace Workers voted to reject an agreement that could have averted the looming strike. 

Sens. Richard Burr (R-N.C.) and Roger Wicker (R-Miss.) introduced legislation on Monday that would impose contractual conditions on the negotiating parties and basically turn management demands into law. 

“A rail worker strike would be catastrophic for America’s transportation system and our already-stressed supply chain,” Burr said in a statement. 

The rail strike would be the latest stoppage caused by increased worker demands. 

On Monday, 15,000 nurses walked off the job in Minnesota, fighting against 13 hospitals in Minneapolis and St. Paul. More than a thousand timber workers for timber giant Weyerhaeuser also went on strike this week in Oregon and Washington, asking for better pay and benefits.  

Inflation is sapping paychecks

The demands for more pay are being driven by an increased cost of living due to high inflation. Consumer prices for August were 8.3 percent higher than they were a year ago, down slightly from 8.5 percent in July and 9.1 percent in June. 

But the most recent dip was mostly due to falling gas prices, while core inflation — which removes the volatile categories of energy and food — continued to rise. This suggests that the effects of diminished wages that are driving laborers’ action will also continue. 

The Labor Department reported Tuesday that “from August 2021 to August 2022, real average hourly earnings decreased 2.4 percent, seasonally adjusted.” 

“Widespread underlying inflation is still not under control, and Americans are paying far too much for everyday goods and services,” Sen. Mike Crapo (R-Idaho) said Tuesday. “While the White House celebrates the mislabeled ‘Inflation Reduction Act’ today, economic data show that food costs rose 11.4 percent over the past year, the largest 12-month increase since May 1979.”  

The Labor Department announced Wednesday that wholesale inflation was up 8.7 percent, a decrease from 9.8 percent in July, but still high. Since most economists attribute the current inflation more to supply than demand factors affecting the economy, this number also suggests that the inflationary pressures affecting the labor market are set to continue. 

Higher interest rates from the Fed could lead to greater unemployment 

In response to inflation, the Federal Reserve has been raising interest rates, which makes it more expensive to borrow money and theoretically stretch the purchasing power of the dollar. 

Rate hikes can also have the effect of increasing unemployment, or “loosening the labor market,” as companies look to cut costs in an environment of more expensive money.  

This dynamic could affect organized labor movements as people lose their jobs.  

In July, unemployment hit its pre-pandemic low point of 3.5 percent, which represents the highest number of people participating in the work force since the late 1960s. But now that number is on the rise, as unemployment hit 3.7 percent in August. 

Additional interest rate hikes are expected from the Federal Reserve. The minutes of the latest meeting of the Federal Open Markets Committee suggest higher unemployment could be on the horizon.

“Many participants also noted … that there were some tentative signs of a softening outlook for the labor market: These signs included increases in weekly initial unemployment insurance claims, reductions in quit rates and vacancies, slower growth in payrolls than earlier in the year, and reports of cutbacks in hiring in some sectors. In addition, although nominal wage growth remained strong according to a wide range of measures, there were some signs of a leveling off or edging down.” 

Labor mobilization isn’t confined to the U.S. 

Increasing labor organization is happening outside the U.S., a movement largely driven by an increase in prices.  

Over the past several months, inflation-related protests have been reported in countries including Ireland, India, Ecuador, Indonesia, Tunisia, Peru and Sri Lanka.  

The United Kingdom even saw its own railroad strike this year, the largest in 30 years. Workers made similar demands to their counterparts in the U.S. 

“It’s the trade union movement, organized labor, that’s going to move these politicians in our direction,” U.K. transportation union leader Mick Lynch said at an August event in London attended by Sen. Bernie Sanders (I-Vt.). 

At the event, Sanders said that unions are seeing a resurgence in popularity. 

“I want to tell you that in the United States, we are now seeing more trade union organizing efforts than we have seen in a very long time. And I want to tell you that because of the pressure on the working class in America, unions are now more popular than they have been since the 1960s,” he said.