UK joining salaries rising at fastest rate since 1997

Bloomberg

UK companies are jacking up starting salaries at a record pace, and some of the country’s biggest grocery chains are already raising pay as labour shortages hand workers unprecedented bargaining power.
The latest signs of wage pressures may add to concern at the Bank of England (BOE), which has raised interest rates three times since December to slow inflation, and is forecast to deliver further hikes this year. Officials are worried about the possibility of a wage-price spiral, where demands for higher pay lead firms to keep raising prices to protect their profit margins.
The Recruitment & Employment Confederation (REC) said the average salary for new permanent joiners climbed more in March than at any time since its survey began in 1997. Last week, Tesco Plc, the country’s largest grocer, said that it’s lifting wages by almost 6%.
UK inflation is already at 6.2%, the fastest in three decades, and may hit double digits later this year. Employers are partly raising pay rates to compensate workers for soaring prices, a worry for BOE Governor Andrew Bailey and his colleagues, though average earnings growth overall is still failing to keep pace.
“We can clearly see that labor and skills shortages are driving inflation,” said Neil Carberry, chief executive of the REC. “The jobs market is very tight. Businesses will need to broaden their searches and be creative in making their offer to candidates more attractive.”
So far, wage gains have been largely confined to people starting new jobs and a few sectors like hospitality that are especially short of staff. Most restaurants closed during pandemic lockdowns and have been scrambling to rehire staff. Elsewhere, like in the public sector, pay growth has been more in line with historical trends.
The REC survey showed that a scarcity of candidates meant companies across the country struggled to fill a rising number of vacancies. Reasons cited include low unemployment, fewer European Union workers and uncertainty created
by the war in Ukraine, which
has made many employees hesitant about switching jobs.
Demand for temporary staff was boosted by absences caused by the record Covid-19
infection levels.
“There is no end in sight to the deep-seated workforce challenges facing the UK economy,” said Claire Warnes, head of education, skills and productivity at KPMG UK. “Many employers will continue to struggle to hire the talent and access the skills they need.”
For workers, the opportunity to command a big wage bump would be unalloyed good news in normal times. But with energy prices soaring and inflation heading for rates not seen in four decades, most will still suffer a sharp fall in living standards this year.