The powerful motivator behind employees wanting more

The gap between wage increases and the annual rate of inflation is still very uncomfortable.

“The desire to keep pace with inflation requires workers to raise wages and benefits, which of course will lead to more inflation,” Greg Valliere wrote in a note to clients. “Railway workers are thriving, but everyone wants more.”

Those are the dollars and cents behind employee discontent. But it’s not just a matter of salary.

Rail union leaders, who this week agreed a tentative deal to avert a massive nationwide strike, say sick leave is a key issue for their 60,000 workers. And railway engineers and drivers complained that their roster system meant they were on call seven days a week.

“This is a quality of life issue,” said Dennis Pierce, national president of the Guild of Locomotive Engineers and Trainmen.

President Joe Biden hailed the tentative agreement as a win for “the dignity of work.”

Workers are crushed by the highest inflation in 40 years, yes, but also exhausted by the disruptions of a pandemic. From an averted rail strike, a teacher walkout in Seattle, a Minnesota nurse strike, and baristas organizing for payoffs, these workers are demanding more from their employers.

For the 15,000 Minnesota nurses who walked off the job on Monday, the big problem was a staff shortage. Last month, 4,500 teachers in Columbus, Ohio, picketed for better heating and air conditioning, decrying “miserable classroom environments.”

“Frankly, for the first time in 50 years, we’re seeing a realignment of power between labor and corporations,” CNN global economic analyst Rana Faroohar told me on CNN’s Early Start. “That’s a very new thing and I hope it continues. I think wages will go up and I think you’ll see more demand for vacations, sick leave, better treatment in industries.”

Valliere agrees: “There will be more contracts of three years or more, and more salaries will be linked to the CPI, because the unions are flexing their muscles.”

Linking the payment to the Consumer Price Index, a key U.S. inflation report, is how Social Security benefits for seniors are calculated each year. Based on inflation rates in recent months, the cost-of-living adjustment for seniors could be close to 9% by 2023.

Here’s the conundrum. For workers, closing this gap between wages and consumer prices could actually be inflationary.

“‘Oh, wages are going up, it’s going to be bad for inflation,'” Faroohar said. “Well, you know, labor is seeing 5% growth overall lately. The things that make us middle class—housing, health care, education—are tripling that. So I think putting a little more money into workers’ pockets is not a bad idea.” .

All this comes against the backdrop of a very tight labor market. There are two jobs for every job seeker. Companies have 11 million job vacancies they want to fill. Supply and demand suggest that, at least for now, the advantage lies with the worker.