Strikes at Ford and GM have resulted in share price bloodletting of late, and other sectors may also have to contend with a resurgent labour movement.
Direct and indirect labour costs account for 76 per cent of company costs, notes Bank of America, so expanding strike action – the number of US workers on strike is at 23-year highs – could drive higher wages and lower profit margins.
Profit margins have declined from 2021′s peak. However, a recent Deutsche Bank report notes the “power gap” between corporate and worker power remains wide.
[ Joe Biden joining a picket line was a landmark moment in US’s year of strikesOpens in new window ]
For decades, profit margins rose much faster than wages, but the world is now at a tipping point. The Deutsche Bank report expects US and European workers to “push for a greater share of the pie”, with more industries joining the global industrial action.
Importantly, this will likely play out over many years, with the power gap continuing to shrink “for the rest of the decade”. That’s good news for workers but not, judging by recent trading in GM and Ford shares, for shareholders.
