Socialist Worker

Covid has stirred up the labour market

by Alex Callinicos
Issue No. 2760

Hospitality workers demanding a minimum wage increase in a protest last year

Hospitality workers demanding a minimum wage increase in a protest last year (Pic: Guy Smallman)


The general agitation about inflation continues among the bosses. In May the rate of inflation bumped up again in both the United States and Britain. The big worry remains about wages, because if they started rising significantly this would squeeze profits across the board.

The bosses would react by increasing prices, workers might demand higher pay, and in this way a 1970s wage-price spiral could develop.

Chris Harman, a former editor of Socialist Worker, showed at the time that wage rises don’t actually cause inflation. But many ruling class commentators—for instance ex-IMF chief economist Olivier Blanchard—believe they do.

These fears are fed by the historical evidence of what happens after pandemics. According to the Economist, “Some research suggests that workers in fact do better in the aftermath of pandemics.

“A paper published last year by the Federal Reserve Bank of San Francisco finds that real wages tend to rise. In some cases this is through a macabre mechanism—the disease culls workers, leaving survivors in a stronger bargaining position.”

Happily, horrific though the Covid-19 death toll is, it’s nowhere comparable to the bubonic plague in the 1340s, which killed a third of the European population.

Sarah O’Connor, the Financial Times’s employment columnist, quotes the Statute of Labourers 1351. “Some, seeing the straights of the masters and the scarcity of servants, are not willing to serve unless they receive excessive wages.”

There are some signs of rising wages. In the US the pay of non-supervisory workers rose in May at an annual rate of nearly seven percent. And there are plentiful stories about labour shortages, especially in the hospitality industry.

O’Connor is sceptical. She points out that more than half of recent pay awards were lower than those received by the same groups of workers a year ago. Most public sector workers have had their wages frozen.

As for the labour shortages, O’Connor says, “Some potential workers are still nervous about the virus (not unreasonably—chefs are among the 10 occupations with relatively high male death rates from Covid-19).

“Others fear they could be furloughed or made redundant again if there is another lockdown.

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“Workers from abroad who went home to be with their families might worry about coming back, only to be stranded on the wrong side of a border from their loved ones.

“People are weighing these risks against the potential rewards—median pay in hospitality is lower than any other sector, at just £8.64 in 2019, and about a fifth of workers are on zero-hours contracts.”

In hospitality and leisure, employers laid off a fifth of workers despite the furlough scheme.

There are shortages in these sectors everywhere. Los Angeles Magazine quotes “a 22-year-old student who worked at a resort restaurant for three years.

“He was initially furloughed, then let go after providing his job with a doctor’s note saying he wasn’t fit to return to work when the restaurant reopened.

Since then, he started attending the University of California Los Angeles and took an internship that he says pays more than what he was making.”

The student said, “It’s not that nobody wants to work like the media is making it out to be, we just know our worth.

“Starvation wages for a difficult job with little to no benefits, terrible management, horrible hours, working every single holiday, as well as a complete disregard for the individual and their health, is not where anybody wants to be working. It was a blessing in disguise for nearly everybody who got let go.”

Rather than a great price explosion, the uptick in inflation looks like the result of temporary disruptions in particular sectors caused by the pandemic.

One example is the shortage of computer chips, which has slowed auto production and pushed up used car prices.

These are what the economist Paul Krugman calls “transitory shocks”.

The same disruptions—and the furloughs and other job subsidies—have widened the options for workers in sectors notorious for low pay such as hospitality. Good luck to them if they start demanding “excessive”—decent—wages.


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