August 14, 2015    4 minute read

The Economics Behind the London Tube Strike

   August 14, 2015    4 minute read

The Economics Behind the London Tube Strike

In addition to the two 24-hour walk out strikes held by unions in the past month, the commuters of London face further disruption following announcements yesterday that additional tube strikes would be taking place from 6:30 p.m. on 25th and 27th August.

The recent 24-hour strike involved 20,000 tube workers. Although previous walk-outs have included tube drivers, the latest reports are that they will not be participating in the strikes at the end of this month. Workers claim that the walk-outs are not with regard to money, but a concern surrounding the protection of their work-life balance.

Tensions have been running high amongst the unions since November 2013, when Transport for London (TfL) reported plans to close ticket offices across London tube stations, cut jobs, and re-position staff in alternative roles. At present, 122 stations have lost their ticket offices, and remaining offices are planned to close by the end of the year.

On the same day as these announcements, plans for the night-tube were revealed with the hope that this would support London’s nocturnal economy. The original protests against the service have become exacerbated as the scheduled launch date of 12th September 2015 looms. There is speculation that the launch may be delayed in response to the strikes in the hope that this will provide the time and space needed for unions and management to negotiate a resolution with minimal impact to commuters.

Tube workers claim that the night tube, which is set to run on the Victoria, Jubilee, and the majority of the Central, Northern and Piccadilly lines, would cause a work-life imbalance. Bosses are accused of drawing up hellish rosters in order to fill the staff gaps in the night tube service. It is argued that such plans would compromise the safety of the public as well as the reliability of the service.

TfL have put forward a revised offer to the unions, including a 2% pay raise for Tube staff, bonuses for night service workers, and a statement that there would be no further increase in weekend shifts for employees. Unions remain unhappy, rejecting the revised offer by stating that they want firm guarantees on night and weekend shifts. The rejection remains controversial, with the average tube driver already earning £49,793 per annum for a 36 hour week and 43 days holiday a year. Station staff salaries begin at £30,000 and rise to £50,000 for a station supervisor, with around 52 days holiday a year. Passengers certainly pay for the generous salaries; a monthly tube pass costs £225.10, compared with the equivalent available in New York for £74.63.

With regard to impact on the economy, there has been varying speculation on quantifying the impact of the tube strikes on the capital.

Last year, the UK Federation of Small Businesses suggested that a 48-hour strike had cost London’s small businesses £300 million a day. It is not certain that this figure remains accurate in 2015, and FSB’s London policy chairman, Sue Terpilowski, stated that employers and employees

“demonstrated their flexibility during the last strike with home working and other flexible working arrangements being put in place”.

Strikes in previous years are likely to act as preparation for businesses to make alternative arrangements during the protests.

In contrast, Douglas McWilliams, executive chairman for The Centre for Economics and Business Research, predicts the strikes have cost the economy a more modest figure of £10 million. This is a result of the flexibility afforded by digital companies, allowing employees to work from home with no loss in productivity. Although he acknowledges that there will be costs for additional fuel usage, the impact is limited further by the increase in popularity of cycling to and from the workplace in London.

While one may speculate that a more limited impact on employers could reduce the bargaining power of the unions, it is still likely that the service industries will be hard hit due to a reduction in foot traffic and a city with fewer workers.

If the new 24-hour weekend tube plans were to be successfully blocked, there may be a loss to swallow. TfL estimates that the new night service will support 2,000 jobs, with the resulting economic output being £360 million over the next three decades. Thus, if no compromise can be reached, then the ever more frequent London tube strikes will cost the city’s economy much more than £10 million.

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