Determining the truth during a strike can often prove challenging, particularly with conflicting narratives spun by both Aer Lingus pilots and the company’s administration. The dispute, bound to conclude in arbitration, may presently seem hiked-up by the pilots only to cool down later – a common negotiation stratagem providing little solace to the multitude of people whose summer plans have been disrupted.
Following the dispute’s resolution, the overarching concern for the wider economy will be whether this instance of an Aer Lingus pilots’ strike is an isolated event or whether it signifies a potential recurrence of more strikes.
The argument from the pilots is uncomplicated. They assert their earnings have dwindled due to inflation, and their objective is simply to recover their lost purchasing power. Conversely, the company management argues that a 24% pay settlement is excessive and a lesser amount is negotiable. It all seems fairly clear-cut.
However, beneath the surface of the dispute resides another issue. Last year, Aer Lingus reported a remarkable profit nearing a quarter of a billion euros. This profit enriches shareholders and partly gets funnelled as incentives to the management. The seasoned pilots, viewing themselves not just as employees but stakeholder members within an ongoing venture, are displeased by management’s disproportionate share in the profit increase.
This clash between stakeholders and shareholders could be viewed as an evolved and more nuanced representation of the last century’s workers versus capitalists debate. In the eyes of the pilots, the workers, they’re being exploited despite growing profits, while the management, metaphorically the capitalists, enjoy the abundance.
A wider question that emerges from this is whether this wage-profit divide exclusive to Aer Lingus is indicative of the wider economic landscape. Have workers’ wages decreased while the earnings of capitalists – from rent, dividends, and returns on property and shares – have experienced a striking uptick? The fundamental narrative emerging is the triumphant return of profits, now sizably outpacing wages, and it’s happening globally.
The worldwide stock market behaviour is the clearest measure of the returns received by capital investors. When stocks rise, shareholder wealth also sees an upswing. As per June records, the American S&P 500 index showed an impressive 26.26% annual rise, reaching 5,277.51. The European Stoxx 50 index also displayed a commendable annual increase of roughly 14.58%.
Turning our attention closer to home, the Irish Stock Exchange (Iseq) underwent significant growth. From January to June 2024, the Iseq index escalated by 7.77%. Soaring corporate earnings in Ireland have presented a robust base for these gains in the stock market. Profits came to a staggering €79.8 billion in Q4 2022, which is 30% more than the previous year’s figure. This profit leap has enhanced stock prices and provided corporates the means to up the dividends and implement share buy-backs, thus further bolstering shareholder prosperity.
Companies witnessing healthy profit growth have handed substantial dividends back to the shareholders, ensuring a greater part of the earnings directly benefit the shareholder’s wealth. The construction surge in Ireland has allowed companies such as CRH to earn considerable profit hikes, which in turn elevates their share costs and returns to shareholders.
Perennial favourites are not to be left behind. The Bank of Ireland has unveiled a share buy-back scheme amounting to as much as €520 million in early 2024, pouring all this cash straight into the shareholder’s accounts. Even Michael O’ Leary hasn’t held back – last year, Ryanair wrapped up a €400 million share buyback scheme.
In essence, being wealthy has never been as rewarding as it is today.
But where does that leave wage earners?
Beginning with America, it’s a known fact that real wage growth after the 2008 crisis was barely noticeable at best. Similar conditions are observed in Ireland and the UK. A report by the International Labor Organisation indicated that in 52 high-income nations, the average wage growth has fallen short of average productivity growth starting from 1999.
Over the past twenty years, labour productivity has seen a real increase of 1.2% on a yearly basis, considerably outpacing wages which have grown at a rate of 0.6%. This disparity has been further amplified by the soaring levels of CEO pay. If we take the US as an example, the average CEO in 1970 took home a salary that was roughly 20 times that of the average worker. Today, this pay gap has rocketed to a staggering 290 times. Similar trends are apparent in other regions, though the rise isn’t as sharp.
It’s also worth highlighting the economic situation in Ireland. The nation has implemented a comprehensive system of social transfers, taxes and benefits, aimed at rectifying wealth inequality. Despite this, significant disparities remain. For instance, households within the lowest 10% income bracket earn an average weekly disposable income of €244, while those within the top 10% earn around €2,865 weekly.
Social transfers are a tool used to balance the scales, without which, the at-risk-of-poverty rate in Ireland would be 38.6% in 2021. However, with these transfers in place, that rate plummeted to 11.6%. The Irish government is making sizable efforts to address this issue, but there remains an evident gap between workers and corporate shareholders.
A dominant factor behind the rising property and share prices over the past three decades, relative to wages, has been the reduction in interest rates. This decline has been driven by struggling economies in the US and Europe, a rise in savings from the older generation and increased saving behaviour following the 2008 economic crisis.
With a shift in the state of economy, marked by increased government expenditure, historically low unemployment rates and an inflation rebound, the dynamics are changing. The future likely holds an escalation in interest rates which is poised to stabilise asset prices, slowly reducing the wealth gap. However, this won’t be an immediate solution.
The core issue prompting disputes such as the one with Aer Lingus is this widening wage gap. Wage disparity is not just a national issue, but a global one, affecting Western societies in their entirety. Both right-wing and left-wing politics are significantly influenced by income inequality. A strong example of this is the rise of Le Pen in France, fuelled by workers discontentment with the soaring cost of living, the rich amassing wealth while the average French citizen bears the burden. Similarly, in the UK, the Labour party, traditionally representing workers, is reaping the benefits of the income gap.
Peering into the future, it’s improbable for financially stable pilots to typically support the less privileged. However, they represent the forefront of an Aldi uprising, associated with people distressed about their weekly grocery bill and asking why they aren’t reaping the rewards of our thriving economy. To ensure societal harmony, there’s a need for wage increment. Prepare for a fresh era of industrial unrest after periods of comparative calm.