Forecasters at the National Institute of Economic and Social Research were spot on when they warned in November it would be “crunch time for household incomes” in the months ahead.
Now they are heading out on strike over a pay offer that will leave staff at Britain’s most venerable economic research institute severely out of pocket as taxes rise and inflation spikes this spring.
Unite, the union, said on Monday that three-quarters of its members at Niesr had voted for industrial action after management refused to improve on an offer to increase salaries by just 2 per cent in 2021-22, in the wake of a pay freeze in 2020-21. Inflation stood at 5.1 per cent in November according to the CPI measure targeted by the Bank of England.
Unite will write to Niesr’s trustees this week accusing the think-tank of placing staff pay “at the bottom of the budget priorities”, in an environment where wage progression was uncertain, “ad hoc” and “opaque”. Out of the institute’s 50 staff, 21 are union members.
Niesr said the past 20 months had been “particularly difficult” as an organisation with no core funding, and that its priority had been to secure all jobs without resorting to government support. Its focus now would be on minimising the impact of the planned action, and continuing to work with Unite members to resolve the situation.
If it goes ahead as planned on January 21, the two-week strike would be the first since the institute was founded in 1938, by a group of social and economic reformers including William Beveridge and John Maynard Keynes.
The timing of the strike could jeopardise the next release of Niesr’s flagship publication, its quarterly UK and global economic forecasts, as well as disrupting project work for external partners.
Those forecasts — when they eventually appear — are likely to show inflation scaling new heights in the coming months, as soaring energy costs push up household bills and prices in the shops.
Some economists have been warning this could lead to persistently high inflation, with a so-called wage price spiral developing as higher living costs lead workers to demand higher pay and companies to raise prices repeatedly to preserve their margins.
Niesr’s own view, set out in its November forecast, was that this was much less likely now than in the past, precisely because trade unions have lost much of their power to “insulate real earnings” from such inflationary shocks.
It forecast average wage growth of 4.5 per cent for 2022, meaning most people would see their income fall behind the cost of living.
The think-tank said inflation-busting pay rises were so far confined to specific roles such as driving and logistics where workers were scarce.
It added that there was a bigger gap than usual between the pay deals companies were offering to all existing staff, and the higher offers they were making to retain key personnel or bring in new hires in areas where recruitment was difficult.
A survey published on Monday by Make UK, the manufacturers’ organisation, also points to unusually wide variation between the pay deals offered at different companies.
Among those that had finalised pay settlements, most were increasing pay by between 2 and 3 per cent — but Make UK said a significant number had offered more than 5 per cent, with one award as high as 14 per cent.