Signaling Theory, IKEA and Public Sector Strikes

The Irish Times explains why today’s planned public sector strike was cancelled. In the media, there was plenty of discussion over how the public sector workers were going to spend their strike day.

Last week, it was widely reported that there was a mass exodus from the city to places like IKEA. This irked many members of the public, but some felt it was reasonable to use the time productively. Why does the trip to IKEA damage the strikers’ cause?

The public sector strike last week was meant to achieve two things. Firstly, it was supposed to coerce the government to capitulate in the wage cut negotiations, and give into the trade unions’ demands rather than suffer the huge inconvenience of the strike. The threat of future strikes was then obviously ominous enough to force a better deal from the workers’ perspective.

The strike also sends a message to the public. Citizens should be shocked that conditions or pay is so terrible, that workers have no option other than to strike. Indeed, only a work-force that was truly suffering a great injustice would go the bother of forgoing a day’s pay in order to protest their treatment at the hands of the government.

In this sense, the strike is a very potent signal. Members of the public infer injustice from such a bold act, and have sympathy for the workers. But in order to be credible, a signal has to be costly to imitate. Why do you take a marriage proposal as a credible sign of commitment? Because no suitor will be willing to spend thousands on an engagement ring unless he was serious.

If workers who weren’t suffering injustice found it easy to strike because it wasn’t a costly endeavor, people would very soon learn to ignore strikes because they no longer communicated any meaningful information. But they don’t find it easy, which is why strikes are such powerful signals.

What happens when public sector workers go to IKEA on their day off? Suddenly, the day of strike no longer seems such an inconvenience to the workers. In fact, it then becomes something that they might even gain some marginal benefit from. Indeed, the subsequent negotiations is proof that all public sector workers wanted in the first place was unpaid days of leave!

By not spending their entire day protesting outside their places of work, the public sector strikers are undermining their case hugely in the eyes of the public. It is no longer a bold statement of injustice, but just a day off for the lads meant to twist the arm of government.

How did this happen? There is clearly a collective action problem at the heart of the behaviour we’re seeing here. The group interest is served when everyone spends the day striking, but the individual stands to gain by slacking off. There’s no point protesting if everyone else is at IKEA. There’s also no point protesting if everyone else is protesting – they won’t miss you.

The solution? Trade unions need to enforce a binding agreement to spend a full day protesting in the event of future strikes. This maintains the strength of the signal, and will ensure that the strikers don’t lose public support in future. That is, presuming the idea behind the strike wasn’t just a day off for the lads meant to twist the arm of government? We may never know.

© The Free Marketeer 2009

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