There is power in a union

After a highly effective four-day strike, Shell tanker drivers pulled of a spectacular pay agreement. The drivers accepted a two year 14 percent increase. Moreover, it is front-end loaded; 9 percent this year and 5 percent next year. The Shell increase is significantly higher than the rate of inflation. So much for pay restraint.

The deal stands in stark contrast to UK average earnings growth. The most recent earnings data shows that most workers, both in the public and private sectors, are now suffering real wage reductions. We all feel it; wages are simply not keeping up with inflation.

How did the Shell workers pull off this extraordinary 14 percent increase, while the everyone else is making do with 3.5 percent? The Shell workers are organised; and they are in a trade union. They threatened a strike, they voted for one, and then they followed through. Once the strikers threatened UK oil supplies, a 14 percent increase seemed very reasonable.

Strike action? Double digit pay increases? Didn't Thatcher kill off the trade unions back in the 1980s?

Certainly, a casual examination of the facts seem to bear this claim out. After 1979, her government passed a series of laws that restricted trade union activity. One by one, the unions attacked, and government faced them down. The last major confrontation; the miner's strike of 1985 was the last of the battles. After that, the trade union movement was finished.

However, the story isn't quite as simple as that. Between the end of the war and 1970, trade union membership was remarkably stable. Around 9 million workers were members, mostly in traditional manufacturing industries. National strikes were comparatively rare, although small "wild-cat" strikes were quite common.

After 1970, things changed. Within 9 years, union membership increased to 13 million, and by the time Thatcher crossed the threshold of 10, about 50 percent of the workforce were members.

Why did membership surge? One word - inflation; when prices are rising, workers have only way of maintaining the value of wages - collective action. During the 1970s, workers belonging to aggressive trade unions were most able to protect their standard of living. Non-unionized workers suffered the most.

Today's Shell agreement provides a powerful example of the importance of unions in times of inflation. Pay restraint, the government are deluding themselves. If inflation continues to accelerate; the unions will be back.