TUAC warns that the latest OECD Economic Outlook, released amid the closure of the Strait of Hormuz and the US-Iran conflict, confirms a deeply troubling pattern: for the second time in four years, workers face an energy-driven cost-of-living crisis while governments repeat the same policy mistakes.
TUAC contests the Outlook’s characterisation of the global economy as resilient. In 2022, the energy crisis hit economies growing at around 6%, backed by strong fiscal support, near-zero interest rates and record household savings. Today, growth is sluggish, fiscal policy is tightening, and interest rates remain high. Average real wages still lag behind 2021 levels, nominal wage growth has slowed, and the labour market tightness of recent years has not delivered sustained wage gains – reflecting the erosion of collective bargaining and labour rights. Against projected inflation of 4.0% at best – and 4.4% under a prolonged disruption – workers face a further significant drop in living standards before previous losses have been recovered.
The OECD’s recommended response threatens to make this worse. Fiscal consolidation during a supply-side shock will suppress demand when economies are most fragile. If the crisis is prolonged, projected additional interest rate hikes up to 0.75% cannot clear geopolitical supply bottlenecks in the Strait of Hormuz and will only drive up borrowing costs for governments, businesses and households. In this scenario, calls for labour market deregulation would further undermine workers’ already weakened position at the worst possible time. These policy failures are compounded by a structural one. The fundamental lesson of 2022 – the need to decouple from fossil fuel dependency through investment in renewable energy – was not acted on. Rather than committing to a fundamental overhaul of their energy systems, many countries simply switched suppliers, leaving workers exposed to the same shock twice.
Mitigating the impact of surging energy costs cannot be limited only to vulnerable households. TUAC argues that governments must protect workers through progressive revenue generation – balancing the tax burden on labour income by revising taxes on capital, wealth and windfall profits – while accelerating a just transition that creates quality jobs and ensures working people are never again left to bear the cost of volatile fossil fuel markets.
Workers' real wages have not recovered from the last crisis, and they are now being hit again. The answer is not austerity – it is public investment, progressive taxation and a just transition that breaks the cycle of energy shocks at workers' expense.
Read TUAC’s full analysis of the OECD Economic Outlook here.
