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Impact of Striking Unions on Economy Reaches Unprecedented Levels

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The Impact of Labor Strikes on the Economy

Labor strikes, including the recent auto workers' strike, have raised concerns among economists about their potential effects on economic growth. While the current United Auto Workers (UAW) stoppage has had limited implications for the broader economy, it is part of a larger pattern of labor-management conflicts resulting in the most missed work hours in 23 years. If the strike were to escalate and involve the 146,000 union members at Ford, GM, and Stellantis, it could have a more significant impact, potentially leading to a 1.7 percentage point quarterly hit to GDP. A broader strike would also complicate policymaking for the Federal Reserve, which is striving to bring down inflation without causing an economic contraction. The challenge lies in determining how much of any economic slowdown can be attributed to the strike versus other factors, such as the impact of student loan payment restarts on consumption. Strikes have already taken a toll on American workplaces, with August alone witnessing the highest number of labor hours lost in a single month since August 2000. Unions have gained a stronger voice in recent years, particularly in the high-inflation era. Workers, who have experienced the effects of inflation, are demanding higher wages and workplace flexibility. Data from the New York Fed indicates that workers are seeking higher salaries when switching jobs, with an average close to $80,000 per year. The UAW has demanded a 36% raise spread over four years, similar to the pay gains of automaker CEOs. Despite the potential for increased wages and inflation concerns, economists believe that labor strife will have a relatively small effect on the overall macroeconomy. Unions make up a declining share of the workforce, reaching a record low of 10.1% in 2022. While the impact of the strike on the economy remains uncertain, Biden administration officials are not yet sounding alarms, emphasizing the need for the two sides to work towards a mutually beneficial resolution. In conclusion, labor strikes have the potential to impact the economy if they persist and escalate. While the immediate impact of the auto workers' strike may be limited, a broader strike could have more significant implications. However, economists believe that the overall effect on the macroeconomy will be relatively small. The focus remains on narrowing disagreements and achieving a win-win solution for both workers and employers.


The rise in labor strikes, as exemplified by the recent auto workers' strike, presents both challenges and opportunities for new businesses. The impact of these strikes on the economy, while currently limited, could escalate if they persist or widen in scope.

Implications for New Businesses

For new businesses, particularly those in industries with a strong union presence, these strikes highlight the importance of maintaining positive labor relations. The demands of workers for higher wages and increased workplace flexibility reflect broader trends in the labor market that businesses must acknowledge and address.
Future Considerations
Looking ahead, new businesses should be prepared for the possibility of increased labor activism. The declining share of the workforce made up by unions does not necessarily indicate a decrease in labor's bargaining power. As workers continue to demand higher wages and better working conditions, businesses must be prepared to negotiate and find mutually beneficial solutions. In conclusion, the "hot take" from the rise in labor strikes is the potential for these actions to reshape the labor market and the broader economy. While the immediate impact of these strikes may be limited, new businesses should be prepared for the potential challenges and opportunities they present. It's crucial for businesses to prioritize fair labor practices and positive labor relations to mitigate the risk of labor disputes and strikes.
Story First Published at: https://www.cnbc.com/2023/09/18/striking-unions-impacting-the-economy-at-a-level-not-seen-in-decades.html
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