Why the “Cost to the economy” of strike action could be misleading

It’s become a modern catchphrase. When planes are grounded, when cars crash, when computers are hacked, and when the earth shakes. There is, it seems, always a “cost to the economy”.

Today, with a mass strike over pensions in the UK, the cliche is brought forth again:

“The Treasury could save £30m from the pay forfeited by the striking teachers today but business leaders warned that this was hugely outbalanced by the wider cost to the economy of hundreds of thousands of parents having to take the day off.

“The British Chambers of Commerce said disruption will lead to many parents having to take the day off work to look after their children, losing them pay and hitting productivity.”

Statements like these (by David Frost, the director general, it turns out) pass unquestioned (also here, here and elsewhere), but in this case (and I wonder how many others), I think a little statistical literacy is needed.

Beyond the churnalism of ‘he said-she said’ reporting, when costs and figures are mentioned journalists should be asking to see the evidence.

Here’s the thing. In reality, most parents will have taken annual leave today to look after their children. That’s annual leave that they would have taken anyway, so is it really costing the economy any more to take that leave on this day in particular? And specifically, enough to “hugely outbalance” £30m?

Stretching credulity further is the reference to parents losing pay. All UK workers have a statutory right to 5.6 weeks of annual leave paid at their normal rate of pay. If they’ve used all that up halfway into the year (or 3 months into the financial year) – before the start of the school holidays no less – and have to take unpaid leave, then they’re stupid enough to be a cost to the economy without any extra help.

And this isn’t just a fuss about statistics: it’s a central element of one of the narratives around the strikes: that the Government are “deliberately trying to provoke the unions into industrial action so they could blame them for the failure of the Government’s economic strategy.”

If they do, it’ll be a good story. Will journalists let the facts get in the way of it?

UPDATE: An inverse – and equally dubious – claim could be made about the ‘boost’ to the economy from strike action: additional travel and food spending by those attending rallies, and childcare spending by parents who cannot take time off work. It’s like the royal wedding all over again… (thanks to Dan Thornton in the comments for starting this chain of thought)

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5 thoughts on “Why the “Cost to the economy” of strike action could be misleading

  1. Dan Thornton

    One comment, in terms of accuracy. Although most parents won’t have used up all their holiday (Assuming they work full time and are therefore entitled to the full allowance, ignoring the fact that many parents work part time around their childcare duties), there is also the fact that many people are expected to book holiday, sometimes in it’s entirety, at the start of the year.

    Aside from that,good points!

    Reply
  2. Paul Bradshaw Post author

    Yes, I used the 5.6 weeks figure because that’s regardless of full time or part time (if you work 2 days per week then it’s still 5.6 weeks that you can take ‘off’). Good point about those who have to book at the start of the year – although of course how many are realistically going to be forced by their employers to take unpaid leave in this situation?

    There’s another side to this as well: if people are having to pay for extra childcare because they cannot take time off work then that is actually a benefit *to* the economy (in the same way that the royal wedding was said to have contributed £X to the economy – an equally dubious claim).

    So do all these marginal cases even out?

    Reply
  3. Louise Bolotin

    Thanks for raising this, Paul. I was listening to breakfast radio this morning when this came up (Beswick on Breakfast on BBC Radio Manchester). Beswick was interviewing someone – a local economist or some such – who said the strike action in Greater Manchester would cost the local economy £11 million.

    £11 million? How the hell did he arrive at that figure? There’s only 2.5 million people living in Greater Manchester and the vast majority of them are not public sector workers, not all of whom struck today anyway. It seemed really spurious but I’d been listening with only half an ear until that figure was raised so I didn’t catch the name of the interviewee.

    I can see that there would be some cost – eg lost days of work because of parents needing to childmind (although as you say, many parents would have booked a day’s leave) and I guess the court closures will cost because of the backlog even a one-day strike can create. But £11 million in Greater Manchester?

    The interviewee offered no breakdown of his figure, but if the figure of £30 million nationally is correct as claimed then Greater Manchester, with less than 5% of the country’s population is causing more than a third of the nationwide cost of the strike? Shurely shome mishtake?

    My inner cynical hack says these “experts” are just plucking figures out of thin air…

    Reply
  4. Kenny Evil

    I always get mad at the “cost to the economy” bullshit line that comes out every so often because of two assumptions:

    1. All working time is equally productive
    2. Those who miss time won’t try to get the work done once they’re back in the office.

    Anyone who has actually worked in an office knows that both of those assumptions are utter fallacies. There can be days where you get nothing done or there is nothing to do and others where there just aren’t enough hours.

    Reply
  5. Peter Lux

    Strikes that increase the wages and conditions (including pensions) of workers may have postive affects in the long term. Workers getting a larger percentage of their share of the profits (and rich bosses get less) could increase spending. Workers are much more likely to spend the money than speculate it on the stock market (very little of which goes into real investment) or put it into tax free saving or offshore accounts. Also increasing security (welfare benefits and secure pensions) would make people less risk adverse.
    I know that the above is very simplistic (assumes a zero sum game etc) but is it any more simplistic than the ‘strikes are bad for the economy’?

    Reply

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