City comment: Are we seeing the beginnings of Boris Johnson’s high wage economy?

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Wherever you look, it seems that the salary is increasing.

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Aging, up, up.

Pret joins Aldi and Sainsbury’s in the hiking pay this week. On the other end of the spectrum, junior lawyers are being paid up to £150,000 the minute they take off their graduation gowns.

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Why are salaries soaring? It’s not the altruism of a CEO worried about rising heating bills.

This is economics: there are not enough workers to meet demand.

Companies are desperate for employees as those who save during the pandemic start spending again. People are going out, going on vacation and buying nice things – all of these require employees.

In the corporate world, private equity firms are cash-strapped and on a buying spree and CEOs eyeing weak rivals to stay afloat or cherry-pick deals. Again, this activity requires people.

Recruiters report a shortage of qualified candidates in almost every sector around the world. Here in the UK, there are four vacancies for every 100 jobs filled – a record high ratio.

Bosses are increasing pay to fulfill those roles and stick to the employees they have, lest they be swayed by a rising pay packet elsewhere.

Where did all the workers go? Some have included this in order to take a sabbatical and make up for lost time – the “great resignation”. Another group concluded that life is short and took early retirement. Then there’s the Brexit effect, which has kept foreign workers from coming in the numbers they once did.

All this is a collusion to increase wages. Perhaps looking at Boris Johnson’s much-anticipated start to a high-wage economy. Whether he is still in Downing Street to see it fully completed is an open question.


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