UK wage growth has hit a new record as companies scramble to find the workers they need. The latest data reveals that British firms have a million job vacancies that they cannot fill. The result is a struggle between companies to get the profiles they need by offering better conditions, which usually mean better salaries.

As published by the Bloomberg agency, this shortage of workers is unleashing a fight without precedents to hire the necessary personnel, now that the economy reopens and demand is growing strongly. The offer tries to keep pace with the horse.

Average income in the three months to June has grown by 8.8% compared to the previous year, a new record, as indicated this Tuesday by the Office of National Statistics. While the figure partly reflects the distortions created by the pandemic, underlying wage pressures are also accelerating.

The rebound underscores the magnitude of the recovery that is taking place after the deepest economic depression in 300 years . Although the Bank of England expects labor market tensions to be temporary, policy makers warned this month that meeting the 2% inflation target will require a modest withdrawal of monetary stimulus.

Shortage of workers “This shortage is a long-term problem that predates the pandemic,” says Neil Carberry, executive director of the Confederation of Recruitment and Employment . “Companies must realize that they are not going to simply vanish.”

These long-term figures that can cause problems are today a stimulus for the Minister of Finance, Rishi Sunak, who seeks to reduce the impact of the pandemic on public finances by reducing the number of unemployed and people with some type of reduction in working hours caused by the pandemic.

“Our employment plan is to work, save jobs in people work and get people back to work, “Sunak said in a statement Tuesday. “There could still be roadblocks, but the data is promising.”

“The rapid change in the labor market showed no signs of slowing down in June. But the real test will come when the government withdraw its particular program to sustain employment (similar to the Erte in Spain) at the end of September. This will be essential for the next steps of the Bank of England, as it is looking for the right moment to adjust its policy “, explains Dan Hanson, from Bloomberg Economics.

Wage growth has been skewed upwards (base effect) by the decreases of the previous year and the composition effects caused by job cuts. However, excluding these factors, the ONS estimates that wage growth is between 4.9% and 6.3%. While if bonuses are excluded, the figure is estimated between 3.5% and 4.9%.

Pressure on inflation The Bank of England is concerned that rising wage pressures will be passed on to inflation , which exceeded the target both in May as in June. The Monetary Policy Committee expects consumer prices to rise as much as 4% by the end of this year before falling towards the 2% target in 2023.

“While the alarm bells are not ringing yet, the monetary policy committee is likely to be on the lookout for where wage increases go from here,” explains Martin Beck, senior economic advisor. of the EY ITEM Club, an expert group on economic forecasts.

The overall unemployment rate fell to 4.7% in the second quarter, the lowest since the summer of 2020 after the first lockdown of the pandemic. That number is expected to rise when wage subsidies for workers in ‘Ertes’ end on 30 September.

On the other hand, the number of vacant positions increased by 290. 000, or a 44%, until 953. 000 between May and July, well above the February level of 2020. Arts, entertainment and recreation posted the strongest quarterly growth. Provisional figures show that vacancies in July only increased 50. 000 to a record of 1, 03 million.

“Vacancies are a forward-looking indicator due to hiring wait times, so we can be confident that employment will continue to increase over the next few months,” says Jonathan Boys, labor market economist at CIPD, a group that represents human resources staff. “The layoff rate has returned to pre-pandemic levels, which is another positive sign that the end of the leave will be relatively painless.”

Despite job availability, the The number of people who are unemployed or out of the workforce is higher than before the pandemic and nearly 1.9 million jobs were still out of work at the end of June. That is fueling inflationary pressures by limiting the supply of labor. While these frictions have begun to dissipate, Bank of England officials acknowledge that they could be larger than projected and persist longer.

Reference

1-Business – Wikipedia
2-Business – CNN
3-Business WorkLife- BBC

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A business is defined as an organization or enterprising entity engaged in commercial, industrial, or professional activities. The term “business” also refers to the organized efforts and activities of individuals to produce and sell goods and services for profit.

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