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Organized Labor Sees a Calm After the Storm in Europe

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Andrew R. Michaud

• November 09, 2023

2023 started off with a bang for organized labor. Strikes by the United Auto Workers and Hollywood writers and actors in the U.S. captured headlines. Meanwhile, Europe, known for its history of labor unrest, went relatively quiet.

However, the calm in Europe hasn't always been the case. In February, strike activity in the United Kingdom reached a post-Margaret Thatcher peak. Germany also experienced a one-day "megastrike" in March that brought the country to a standstill. Transportation unions caused chaos as the summer travel season approached.

Now, as autumn sets in, a sense of eerie calm has taken hold. "The storm has passed for now," remarks Nina Skero, CEO of U.K.-based consultant Cebr.

One reason for this calm is that the winter-spring labor strikes were successful. In March, German postal workers secured an average 11.5% pay increase. U.K. teachers settled for a 6.5% raise in July. These victories have had a ripple effect on economies, with wage hikes of 7% to 8% being reported in the U.K., according to Hannah Slaughter, senior economist at the Resolution Foundation in London.

Governments have also stepped in to mitigate the impact of inflation on citizens. In 2022, Germany allocated 2% of its gross domestic product to subsidize energy costs. Similarly, France and Italy each devoted 1% of their GDP for this purpose, as estimated by the European Commission. In addition, the U.K. has raised its minimum wage by an impressive 45% since 2016, now standing at 10.42 pounds sterling ($12.81) per hour.

The macroeconomic landscape in Europe has also undergone significant changes. Inflation, which was a major driver behind the strikes, has dropped from 10% to 3% in the euro area over the past year. The U.K. rate has also seen a decline, going from 11% to below 7%.

With attention now turning to the prospect of recession, Eoin Drea, senior researcher at the Wilfried Martens Centre for European Studies, predicts that most of Europe will be gripped by economic downturn early next year. This shift in focus has dampened expectations for both employers and unions, raising concerns about what the winter will bring.

The Decline of European Organized Labor

Especially damp is Germany, home to Europe’s premier private-sector union, 2.2-million-strong IG Metall. GDP there has shrunk in three of the past six quarters. The heavy industry where IG Metall might flex its muscle has been rocked by the cutoff of cheap Russian natural gas and threatened by emerging Chinese supremacy in electric vehicles.

The New Direction of IG Metall's Leadership

Christiane Benner, who made history by becoming the mega-union’s first female boss last month, has started out playing defense. Rather than stick it to the bosses, she’s lobbying government to halt the “creeping dismantling of industry and jobs.”

Restive French unions focused their energy and political capital this year on street protests against President Emmanuel Macron’s plan to raise the pension age. Macron forced through the reform unilaterally. The demonstrations subsided with little carry-over into industrial action. Strike-prone Italy has also gone quiet. “France and Italy have been quite stable from a labor market point of view,” Drea says.

Challenges for European Organized Labor

Creeping dismantling might describe the long-term picture for European organized labor. This year’s strikes were concentrated in the public sector. Private-sector unions struggle against the same headwinds as U.S. counterparts: outsourcing, gig work, and declining membership, says Kurt Vandaele, senior researcher at the European Trade Union Institute. “With the increase of temporary contracts and far less political support, it’s not a very optimistic picture,” he says.

IG Metall's Warning to Elon Musk and Tesla

IG Metall’s Benner is nonetheless warning one new German employer that her union isn’t dead yet. That would be Elon Musk and Tesla (ticker: TSLA), which is revving up production at its gigafactory outside Berlin. “You need to be careful,” she told the headstrong billionaire in a Bloomberg interview. “The rules of the game are different here.”

Musk didn’t answer, but he did give his German workers a 4% raise.